R&D Tax Incentive - August deadline fast approaching

R&D Tax Incentive application process

Applying for the R&D Tax Incentive (RDTI) 15% tax credit on eligible R&D activities for the 2020/21 income year is a two-step process.

  1. Claimants must firstly enrol for the RDTI under MyIR and apply for General Approval that the R&D Projects are eligible for the credit. 
  2. If approved, the second step is to submit the supplementary return to claim the RDTI credit. This is to be filed no later than one month after the due date for filing the 2020/21 income tax return.

General Approval application deadlines

The first step is critically important and General Approval applications must be submitted before the due date. Applications are typically required by the 7th day of the second month after balance date. However, for the 2020/21 income year, the deadlines have been extended. 

COVID-19 extension: Firstly, the General Approval application deadline was extended under a COVID relief measure to the 7th day of the fifth month (ie. 7 August for claimants with a 31 March balance date).

Unconditional extension: Secondly, by a Ministerial announcement on 25 June 2020, General Approval applications for year two (2020/21 income year) were granted a further unconditional extension to 31 August 2021.

Although legislation extending the General Approval to 31 August has not yet been released, the RDTI website has been updated for the extension. https://www.rdti.govt.nz/claiming-the-rdti/claims-date-finder

The General Approval dates are therefore:

Balance Date Year End Due Date Covid Extension Unconditional Extension
Early 31 December 2020 7 Feb 2021 7 May 2021 31 August 2021
Standard 31 March 2021 7 May 2021 7 August 2021 31 August 2021
Late 30 June 2021 7 August 2021 30 September 2021* 31 August 2021

*Note for late balance dates the COVID extension was not extended beyond 30 September 2021.

The unconditional extension announced by the Minister of Revenue is particularly helpful for companies with an early balance date who hadn’t submitted a General Approval application by 7 May. Without this extension those claimants would be out of time to apply.  

The retention of a COVID extension will be helpful to late balance date claimants where the planning or conduct of eligible R&D or the process for making an application has been materially delayed or disrupted by the COVID-19 outbreak and its effects.

General Approval – What’s involved

The application for general approval requires you to identify eligible projects and articulate:

  • the objective of the project,
  • the systematic process being followed,
  • the new knowledge or new or improved processes, services and goods being pursued; and
  • the scientific or technological uncertainty you are trying to resolve. (Scientific or technological uncertainty does not exist if the answer is publicly available or able to be deduced by a competent professional).

The more care taken to clearly explain the above core activities and any supporting activities carried out under each project (including the scientific or technological uncertainty), the more likely the application will be approved. 

Act now

Not surprisingly the presence of two August due dates causes some confusion as to whether the General Approval needs to be lodged before 7 August or 31 August.  

Both dates are valid. But there is an advantage for those applications lodged before 7 August as General Approvals lodged after that date, but before 31 August, may not be able to be processed by IRD until such time as the amendment has been passed in legislation. This could be as late as March 2022.  

The message is clear. If you are contemplating lodging a claim for RDTI for the 2020/21 income year, then ACT NOW and get your general approval application ready to file on or before 7 August 2021. 

Note if you were previously a recipient of a Callaghan Growth Grant and wish to receive the one-off transitional support adjustment for the 2021/22 income year, you must enrol in the RDTI program and submit a general approval application by the due date. 

If you would like to explore whether your R&D activities will be eligible projects, please contact your BDO Adviser.