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Income Tax Act 2007

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

You could also call this:

“Activities not eligible for research and development tax credits”

You can’t do some activities if you want to get tax credits for research and development. These activities are divided into two groups: those that don’t count as core research and development, and those that don’t count as supporting research and development.

For core research and development, you can’t include things like getting ready for production, fixing small problems in computer software, or doing routine maintenance. You also can’t include market research, legal work for patents, following rules set by the government, or studying how to manage things better. Other activities that don’t count are making small improvements to existing things, testing software, changing how something looks, or copying a product that already exists.

For supporting research and development, many of the same rules apply. You can’t include getting ready for production, fixing small software problems, or doing routine maintenance. Market research, legal work for patents, and following government rules for things that already exist also don’t count. If section 68CB of the Tax Administration Act 1994 applies to you, you can only do activities that are approved under that section.

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

Topics:

Money and consumer rights > Taxes

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

“Tax deductions for improvements in farming and related industries”

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

“Money spent on creating or improving things (research and development)”

21Excluded activities for research and development activities tax credits

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).