For businesses investing heavily in innovation, conversations about the R&D Tax Incentive (RDTI) tend to start with the CFO or finance team. That makes sense. But the conversation shouldn’t stop there.
When a business is making significant decisions about R&D, directors should be across the RDTI opportunity and how the business is approaching it. At its best, RDTI can support continued investment in innovation and help businesses go further with the capital they have.
For directors, that means bringing RDTI into the broader conversation around innovation, investment and growth, and asking the right questions of management.
If innovation is important enough to be discussed around the board table, RDTI should be part of the conversation too.
Innovation Is Already a Board-Level Conversation
For many businesses, innovation is central to the growth strategy. Boards are already making decisions about where to invest, which opportunities to back, and how to deploy capital in pursuit of future growth.
That makes RDTI relevant from a governance perspective. If the board is overseeing significant investment in innovation, it should have visibility over the mechanisms that can materially affect the economics of that investment. RDTI is one of them.
When eligible R&D can attract a 15% tax credit, the impact can be significant. A $1 million R&D programme, for example, could generate up to $150,000 in tax credits.
This isn’t about turning RDTI into another compliance item for the board. It’s about good oversight of innovation investment. Could our innovation workstreams be eligible for RDTI? And if we’re already claiming, are we making the most of the opportunity?
Making Innovation Investment Go Further
The value of RDTI isn’t just the tax credit itself. It’s what that capital allows the business to do next.
For businesses with an ongoing innovation programme, RDTI can create a valuable cycle. Investment in eligible R&D generates a tax credit, which can create greater capacity for further R&D. Over time, that can mean more resource to test ideas, improve products and processes, and pursue the next opportunity.
For directors thinking about capital efficiency, this is an important part of the picture. The question isn’t simply whether the business is investing enough in innovation. It’s whether it is making the most of the mechanisms available to make that investment go further.
Are We Making the Most of the Opportunity?
For businesses already claiming RDTI, there’s another question worth considering: do we have a complete view of where eligible R&D might be happening across the business?
It’s easy to associate R&D with the big innovation projects. A new product, a new technology or a major development programme. But innovation can also happen in less obvious places, including:
- Product iteration and improvement
- Continuous improvement programmes
- Process innovation
- Solving difficult technical problems
These activities can all contain potentially eligible R&D, which is why starting with a complete view of innovation across the business matters.
One of the key challenges with RDTI is identifying which activities are actually eligible. Many businesses start with a narrow view of what they consider to be R&D, which can limit the scope of what is ultimately assessed for a claim. A better starting point is to take a complete view of innovation activity across the business, then work through which activities meet the RDTI criteria.
The board doesn’t need visibility over every activity being assessed. What matters is confidence that the business has a robust process for identifying its R&D and isn’t overlooking potentially eligible work simply because it sits outside the most obvious innovation projects. That’s the difference between simply claiming RDTI and making the most of the opportunity.
Bringing RDTI Into the Conversation
Getting the most from RDTI starts with thinking about it proactively, rather than treating it as an exercise at the end of the year. For businesses investing meaningfully in innovation, considering RDTI earlier creates a clearer view of the opportunity and how it fits alongside planned R&D investment.
From a governance perspective, the goal isn’t for directors to become RDTI experts. It’s to have enough visibility to know that the opportunity is being considered, appropriately managed and connected to the broader innovation strategy.
For directors, there are a few useful questions to bring into the conversation:
- Are we considering RDTI alongside our innovation strategy and planned R&D investment, or only after the investment has been made?
- Do we have confidence that potentially eligible R&D is being identified across the business, including innovation happening outside our most obvious R&D projects?
- Do we understand the potential scale of the RDTI opportunity and how it affects the economics of our investment in innovation?
- If we’re already claiming, are we confident we’re capturing the full RDTI opportunity available to the business?
- Do we have the right expertise and processes in place to approach RDTI effectively and with confidence?
If innovation, investment and growth are already on the boardroom table, RDTI deserves to be part of the conversation too.
About Swell
Swell are dedicated R&D Tax Incentive advisors. We work with innovative businesses across New Zealand to access the incentive, managing the claim process from end to end.
Our team handles both the technical reporting and financial calculations required for a robust RDTI claim, as well as all liaison with MBIE and IRD throughout the process.
Our model is designed to take the burden of RDTI off internal teams, giving businesses confidence that the process is being handled by specialists while they stay focused on their other priorities.
Interested in understanding the RDTI opportunity for a business you’re involved with? Whether it’s considering RDTI for the first time or reviewing an existing claim process, get in touch with the Swell team for a conversation.
