The R&D Tax Incentive (RDTI) is one of the most powerful funding tools available to innovative New Zealand businesses. More than half (based on 2023 data) of those who claim receive over $100,000 in tax credits – often paid out as cash. This funding can be used to scale production, hire new staff, or simply ease cashflow pressures.
And yet, most eligible businesses aren’t claiming.
We estimate that only around 20% of eligible companies are currently accessing the RDTI. That leaves a huge pool – thousands of businesses – missing out on funding they’re entitled to.
So, what’s holding them back?
One of the biggest barriers is confusion around eligibility. Some businesses assume the incentive isn’t for them. Others put it in the too-hard basket – unsure if they qualify and reluctant to spend time navigating a process they don’t fully understand.
This article is here to clear some of that up. We’ll explore what RDTI eligibility really means, break down the three core principles your R&D activity must meet, and tackle some of the most common misconceptions along the way.
RDTI Eligibility: Three Core Principles
So, what actually qualifies as eligible R&D under the RDTI?
To help make sense of the legislation, we use a simple framework built around three core principles: The Objective, The Uncertainty, and The Approach.
To be eligible, your R&D must tick all three boxes. Here’s how each one works:
1. The Objective
Your R&D must aim to create a new or improved product, process, service – or new knowledge. This might be something you’re developing for a client, launching into a new market, or refining to meet compliance, environmental, or performance goals.
There are plenty of reasons businesses invest in R&D – staying competitive, solving technical challenges, reducing emissions, unlocking new revenue, or improving the customer experience. What matters is that you’re pushing beyond what’s currently known or readily achievable.
The end goal? Something that represents a genuine step forward in capability, built on new scientific or technological knowledge.
2. The Uncertainty
If the objective is about what you’re trying to achieve, uncertainty is about what’s standing in your way.
To be eligible for the RDTI, your work must involve a scientific or technological uncertainty – something that can’t be easily solved using existing knowledge, experience, or standard techniques.
That might sound a bit technical, but put simply, it means one of the following is true:
- You don’t know how to achieve your objective
- You don’t know if it’s even technically possible
- You’re combining systems, processes, or technologies and don’t know how they’ll work together
And importantly – a quick Google search or chat with someone experienced doesn’t give you the answer. If even a competent professional can’t immediately figure it out, you’re in uncertain territory. That’s the space where true R&D happens – and where the RDTI is designed to apply.
3. The Approach
Once you’re dealing with uncertainty, the next question is: how are you tackling it?
To qualify for the RDTI, your R&D must follow a systematic approach. That means you’re not just making educated guesses or tinkering at random – you’re working through a planned, structured process to try and resolve the uncertainty.
This kind of approach is typically needed when:
- There’s no publicly available knowledge
You can’t rely on existing information – you need to generate insight yourself.
- There’s no off-the-shelf solution
The answer isn’t obvious or readily available – you need to test different ideas and methods to find what works.
- It requires testing and refinement
Even a skilled professional can’t solve the problem in their head – you need to explore, build, trial, break, and iterate.
In other words, the RDTI supports work that’s methodical, investigative, and geared toward building new capability – not work that’s solved through implementation alone.
If your team is designing experiments, running prototypes, testing hypotheses, or capturing data to guide your next steps – you’re likely taking the kind of systematic approach that fits the bill.
Examples of RDTI Eligibility
To bring the eligibility principles to life, here are three real-world examples of work that could qualify for the RDTI.
1. Manufacturing
An engineering firm is designing and testing a new lightweight component for use in aerospace applications. It needs to be durable, heat-resistant, and meet strict compliance standards.
- The Objective: Develop a new aerospace part that reduces weight without compromising strength or safety.
- The Uncertainty: The team isn’t sure which materials or manufacturing techniques will deliver the required performance – and existing solutions aren’t proven for this specific use case.
- The Approach: They prototype different designs, trial advanced materials, and carry out testing under simulated flight conditions to validate performance.
2. Technology
A software company is developing an AI-powered tool that can accurately identify manufacturing defects from camera footage in real time – across a wide range of product types and lighting conditions.
- The Objective: Build a new AI model that improves defect detection accuracy in complex, real-world environments.
- The Uncertainty: It’s unclear what model architecture, training approach, or data pre-processing techniques will deliver the required accuracy – especially under variable conditions.
- The Approach: The team experiments with different algorithms, trains and tests models on various datasets, and evaluates results to improve performance.
3. Biotechnology
A biotech company is developing a new probiotic supplement to improve gut health in livestock, aiming to reduce antibiotic use in farming.
- The Objective: Create a new probiotic formulation that supports animal health and meets regulatory standards for use in agriculture.
- The Uncertainty: It’s unknown which strains will survive the digestive process and deliver benefits in different animal species – and how these will interact with existing feed systems.
- The Approach: The team tests various strains and delivery methods, runs controlled feeding trials, and analyses biological responses to refine the formulation.
Common Misconceptions About RDTI Eligibility
“What we do isn’t ‘R&D’.”
It’s a very Kiwi thing to downplay or overlook the innovation happening right in front of you. Many businesses don’t see their work as “R&D” – especially if they’re not wearing lab coats or working in a traditional science setting.
But if you’re tackling scientific or technological uncertainties in a structured way, with a specific goal in mind, your work could well be eligible – even if it doesn’t feel like classic R&D.
“It’s client work, so it doesn’t count.”
R&D carried out for a client can be eligible – as long as your business drives the R&D activity and the activity meets the criteria. This is often missed by companies in technology, contract manufacturing, and product design.
If your team is doing the heavy lifting to solve technical problems, it’s worth a closer look.
“It’s just a process improvement – that’s not eligible.”
Process innovation is one of the most commonly overlooked areas. While not every process tweak qualifies, many do – particularly when you’re developing new methods, technologies, or overcoming technical roadblocks.
If it involved testing, trialling, or figuring out how to make something work in a new way, it could meet the criteria.
Wrapping Up
Understanding RDTI eligibility doesn’t have to be overwhelming. At its core, it’s about recognising the value of the work your team is already doing – especially the kind that involves solving tricky problems or pushing into the unknown.
At Swell, we specialise in helping Kiwi businesses navigate the RDTI. We work closely with you to unpack your projects, identify what’s eligible, and guide you through the claim process with clarity and confidence.
Keen to explore your eligibility? Get in touch – we’d love to hear what you’re working on.