Budget 2014: R & D tax break for startups

Photo / APN

Businesses will receive a $60 million tax break on research and development spending over the next four years under two new measures in today's Budget.

Loss making startup companies will be able to "cash out" all of their tax losses from R&D spending, Science and Innovation Minister Steven Joyce and Revenue Minister Todd McClay said.

Also, all businesses will be allowed tax deductibility for R&D "black hole" spending which currently is neither deductible or able to be depreciated.

The first measure means R&D intensive companies will have early access to all or part of their tax losses in the form of a cash receipt, rather than carrying those losses forward.

The second means that all capitalised costs on depreciable, intangible assets such as patents will be deductible over time. Currently only the legal and administrative costs of registering such assets are deductible.

In addition, businesses will be entitled to a one off deduction on capitalised development spending on intangible assets that are subsequently written off.

Mr Joyce estimate the two moves would return about $58 million in tax over the next four years as part of moves "reduce tax hurdles that discourage R&D investment by innovative companies".

Mr Joyce also announced the Government was increasing contestable science funding by $57 million over three years from next year onwards.

He also committed an additional $53 million over four years to establish three new Centres of Research Excellence (CoRES).

The centres are "cross-institutional research networks that support production of the absolute best research and researchers in tertiary education institutions across New Zealand"

The new funding will bring the total number of CoRES receiving funding to ten.