Income Tax Act 2007

Schedule 21: Excluded activities for research and development activities tax credits

You could also call this:

"What activities are not allowed for research and development tax credits?"

When you do research and development, some activities are not included. You can find the rules in the Income Tax Act 2007, specifically in the section about excluded activities for research and development activities tax credits, which is empowered by s LY 2. These activities are not part of what is called core research and development.

Some activities that are excluded include preproduction, routine debugging of computer software, and market research. You are also excluded from activities like management studies, organisational design, and routine software maintenance. If section 68CB of the Tax Administration Act 1994 applies to you, you cannot do activities that are not approved under that section.

There are also activities that are excluded from what is called supporting research and development, which are similar to the excluded core research and development activities. These include preproduction, routine debugging of computer software, and market research, as well as management studies and organisational design. Again, if section 68CB of the Tax Administration Act 1994 applies to you, you cannot do activities that are not approved under that section.

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This page was last updated on 20 May 2025

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS199577.

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Money and consumer rights > Taxes

Schedule 20: Expenditure on farming, horticultural, aquacultural, and forestry improvements, or

"Improvements to farms and forests that you can claim on your tax"

Schedule 21: Expenditure and activities related to research and development, or

"Money spent on researching and developing new things for tax purposes"

21Excluded activities for research and development activities tax credits Empowered by s LY 2

AActivities that are excluded from the definition of core research and development activity

Preproduction activities, including demonstration of commercial viability and tooling up.
Routine de-bugging of existing computer software.
Supporting or making minor improvements to existing computer software using known methods.
Routine software and computer maintenance.
Market research, market testing, market development, or sales promotion, including consumer surveys.
Commercial, legal, or administrative aspects of patenting, licensing, or other similar activities.
Activities involved in complying with statutory requirements or standards.
Management studies.
Activities relating to organisational design.
Ineligible internal software development.
Research in social sciences, arts, or humanities.
Quality control or routine testing of processes, services, or goods.
Routine collection of information.
Minor adaption of, or improvement to, existing processes, services, or goods.
Bug testing, beta testing, system requirement testing, user acceptance testing, and data integrity testing.
Data mapping and data migration testing.
Testing or comparing the efficiency of algorithms that are already known to work.
Testing security protocols or arrangements.
Converting existing systems to, or integrating existing systems with, new software platforms.
Making cosmetic or stylistic changes to processes, services, or goods.
Reproduction of a commercial product or process by a physical examination of an existing product or system, or from plans, blueprints, detailed specifications, or publicly available information.
Carrying out routine operations on data, including presentation of data.
If section 68CB of the Tax Administration Act 1994 applies for the person, activities that are not approved under that section.

Notes

Schedule 21 Part A clause 5: repealed (with effect on 1 April 2019), on 30 March 2021, by section 136(1) (and see section 136(3) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).

BActivities that are excluded from the definition of supporting research and development activity

Preproduction activities, including demonstration of commercial viability and tooling up.
Routine de-bugging of existing computer software.
Supporting or making minor improvements to existing computer software using known methods.
Routine software and computer maintenance.
Market research, market testing, market development, or sales promotion, including consumer surveys.
Commercial, legal, or administrative aspects of patenting, licensing, or other similar activities.
Activities involved in complying with statutory requirements or standards for pre-existing processes, services, or goods.
Management studies.
Activities relating to organisational design.
Ineligible internal software development.
If section 68CB of the Tax Administration Act 1994 applies for the person, activities that are not approved under that section.

Notes

Schedule 21 Part B clause 5: repealed (with effect on 1 April 2019), on 30 March 2021, by section 136(2) (and see section 136(3) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Schedule 21 Part B clause 12: inserted (with effect on 1 April 2019), on 23 March 2020, by section 187(1) (and see section 187(2) for application) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).