--- title: "New Zealand: Startup Strategy Advisory | DM & Associates" description: "Strategy for New Zealand seed founders: why the cash-out of R&D losses is repayable, how commercial hiring breaks the 20% ratio, and which agency now does what." url: "https://dmassociates.xyz/regions/new-zealand/" --- Where we work · New Zealand # The money a pre-revenue New Zealand company can reach is an advance on its own tax. Cashing out research and development losses is the instrument that actually pays a loss-making company here, and it has to be repaid once the company turns a profit. Meanwhile the agency most guides name has been disestablished and its functions have moved. We work with New Zealand founders remotely from Hyderabad, in English. We have no office and no entity in New Zealand, and we say so plainly. [Book a call](https://bookings.dmassociates.xyz/#/362591000000049559) [Request a Strategic Diagnostic](https://dmassociates.xyz/advisory/diagnostic/) New Zealand in six numbers ## Two instruments, and only one of them is a credit you keep. 1. 15% The research and development tax incentive, as a credit on eligible expenditure. The work must seek to resolve scientific or technological uncertainty. [Inland Revenue, R&D tax incentive](https://www.ird.govt.nz/research-and-development/tax-incentive) 2. NZD 50,000 The minimum eligible spend a year for that incentive. More than twice the Australian floor, which is one reason the same project can be worth claiming on one side of the Tasman and not the other. [Inland Revenue, R&D tax incentive](https://www.ird.govt.nz/research-and-development/tax-incentive) 3. Approval first The incentive requires the activities to be approved before the credit can be claimed. Registration, then a general approval or a criteria and methodologies approval, then a supplementary return. [Inland Revenue, R&D tax incentive](https://www.ird.govt.nz/research-and-development/tax-incentive) 4. Up to 28% The separate loss tax credit, a refund of up to 28% of tax losses from research and development activity for a loss-making resident company. [Inland Revenue, R&D loss tax credit](https://www.ird.govt.nz/research-and-development/loss-tax-credit) 5. Repayable That refund must be repaid when the business starts making a profit or on a loss recovery event, and until it is repaid the company cannot claim imputation credits for income tax paid. [Inland Revenue, R&D loss tax credit](https://www.ird.govt.nz/research-and-development/loss-tax-credit) 6. 20% The share of total labour expenditure that must go to research and development for the loss credit to apply — a ratio, which means it can be failed by hiring. [Inland Revenue, wage intensity criteria](https://www.ird.govt.nz/research-and-development/loss-tax-credit/eligibility/rd-wage-intensity-criteria) The two are different instruments and the revenue department says so explicitly. Conflating them is the commonest error in writing about this market, and it matters because one is a credit a company keeps and the other is cash it gives back. The institution ## Callaghan Innovation is being disestablished. Almost every secondary guide to New Zealand innovation funding names an agency that is mid-move. The position is also not a simple handover: functions went to three different places and some products no longer exist. - The grants and the incentive support are now delivered from within the ministry. Research and development tax incentive support, the New to R&D grant, the career and experience grants, startup and founder support, and existing project grants and loans have transferred to the Ministry of Business, Innovation and Employment. The agency says the same teams and the same contacts continue. [Callaghan Innovation, disestablishment updates](https://www.callaghaninnovation.govt.nz/about-us/disestablishment-updates/) - Other services went to two newly created research organisations. A bioresource processing programme moved to a new institute for the biological and primary sectors; a product accelerator and a health technology programme moved to a new institute for commercialising advanced technologies such as artificial intelligence, quantum computing and synthetic biology. [Callaghan Innovation, disestablishment updates](https://www.callaghaninnovation.govt.nz/about-us/disestablishment-updates/) - A residue is still with the agency, waiting on legislation. The biotechnologies group, the food innovation network, the measurement standards laboratory and the deep tech technology incubator programme remain with Callaghan Innovation until the legislation required to complete the transfers is passed. Those services continue in the meantime. [Callaghan Innovation, disestablishment updates](https://www.callaghaninnovation.govt.nz/about-us/disestablishment-updates/) - And some products were retired. The agency states that a number of products and services have been retired, without listing them. So the risk is not only that a document names the wrong institution: it may describe something that no longer exists at all. [Callaghan Innovation, disestablishment updates](https://www.callaghaninnovation.govt.nz/about-us/disestablishment-updates/) The practical consequence for a founder is narrow and useful. Anything written about New Zealand funding before 2025 — a programme pack, an adviser’s deck, a blog post — names an institution for a function it no longer performs. Check who delivers it now before you plan around it. The cash-out ## A ratio, an ownership test, and a repayment. This is the instrument a pre-revenue company actually reaches, and three of its conditions are operating decisions rather than tax ones. - The 20% test is a ratio, so commercial hiring can break it. Research and development labour expenditure divided by total labour expenditure must be at least a fifth. A company that adds two salespeople to chase its first revenue can fall below the line in the year it most needs the cash, without anything changing about the research itself. [Inland Revenue, wage intensity criteria](https://www.ird.govt.nz/research-and-development/loss-tax-credit/eligibility/rd-wage-intensity-criteria) - Contractor work counts at a discount, and the components move together. Contracted research counts at 0.66 of the contract price excluding goods and services tax, a multiplier the department says is meant to strip out profit and non-wage costs. Fringe benefits, the tax on them, employer superannuation contributions and the tax on those may be included — but on both sides of the ratio or on neither. [Inland Revenue, wage intensity criteria](https://www.ird.govt.nz/research-and-development/loss-tax-credit/eligibility/rd-wage-intensity-criteria) - The company must own the intellectual property that results. Solely or jointly. This is the condition that catches a subsidiary developing against a parent’s intellectual property, and a company that assigned its output to a customer or a contractor in an agreement signed long before anyone thought about tax. [Inland Revenue, eligible companies](https://www.ird.govt.nz/research-and-development/loss-tax-credit/eligibility/eligible-companies) - Groups are tested as groups. Where the company is part of a group, the group as a whole must be in a tax loss position and the group as a whole must meet the wage intensity threshold. A profitable sibling can end the claim. [Inland Revenue, eligible companies](https://www.ird.govt.nz/research-and-development/loss-tax-credit/eligibility/eligible-companies) - Several structures are excluded outright. A company treated as resident of another country under a double tax agreement, a look-through company, a listed company, or one at least half owned by public authorities, Crown research institutes or state enterprises cannot use the credit at all. [Inland Revenue, eligible companies](https://www.ird.govt.nz/research-and-development/loss-tax-credit/eligibility/eligible-companies) - And then it is repaid. The cashed-out losses are not carried forward, and they come back when the company becomes profitable or on a loss recovery event. Until they are repaid, imputation credits for income tax paid cannot be claimed — which reaches shareholders, not just the company. [Inland Revenue, R&D loss tax credit](https://www.ird.govt.nz/research-and-development/loss-tax-credit) We are not tax advisers and we file nothing. What we work on is the decision underneath: how the team is composed through the year, what the contractor and customer agreements say about who owns the output, and what the repayment is worth to the company against what it costs later. Founders ## Where New Zealand seed companies get stuck. | Problem | What it looks like | What we work on | | --- | --- | --- | | The cash-out priced as free money | A refund arrives and goes into the plan as non-dilutive funding. It is repayable on profit, and it blocks imputation credits until it is — so the real cost lands in the first good year. | Pricing it as what it is, an advance against the company’s own future tax, and deciding on that basis whether it is the right money for this stage. | | Failing the ratio by selling | The company hires into go-to-market and the research share of total labour drops under a fifth. The claim is lost in the year the company finally started commercialising, which is exactly the year it was counting on. | Planning the hiring sequence with the ratio visible, and deciding deliberately which year to give the credit up in when the two genuinely conflict. | | Intellectual property signed away early | A first customer contract or a contractor agreement assigns the output. The ownership condition then fails, and it fails retrospectively for work already done. | Reading the customer and contractor terms as eligibility conditions before they are signed, with your lawyer drafting and us naming what has to be preserved. | | An approval that cannot be made retrospectively | The incentive needs the activities approved before the credit is claimed. A company that frames the work as research after the fact finds that the sequence does not allow it, unlike across the Tasman. | Framing the programme of work as research in advance, which is a planning job, and getting the registration into the calendar rather than the backlog. | Working with us from New Zealand ## Hours, invoices and what we are not. - **Hours** — New Zealand is six and a half hours ahead of India in winter and seven and a half in summer. The overlap is a single window: an Auckland late afternoon is a Hyderabad late morning. We schedule inside it and we do not pretend it is wider than it is. - **Language** — English. - **Tax** — We are not tax advisers and we file nothing. Everything on this page is a condition with its source attached, and your accountant advises on it and submits it. - **Due dates** — Inland Revenue publishes due dates for general approval applications, criteria and methodologies applications and supplementary returns, and has extended some of them in the past. We could not load that page when we last checked, so this page gives the sequence and not a date. [Inland Revenue, R&D tax incentive](https://www.ird.govt.nz/research-and-development/tax-incentive) - **Goods and services tax** — Services bought from outside New Zealand may fall within the reverse-charge rules. We state no figure; your accountant confirms the treatment. - **Data** — The Privacy Act applies. We act as a data processor under a written agreement, and we will tell you where founders’ work in Founder OS is stored before you put anything in it. - **Invoices** — In NZD or USD, from our Indian company. Questions ## Credits, repayments and the things we do not do. Is cashing out our losses a good idea? It depends on what the company has to prove next and what the repayment will cost in the first profitable year, including the effect on imputation credits. It is a decision worth taking early and on its merits rather than late and under pressure. We will work through it with you; we are not financial advisers and we do not arrange finance. Who runs New Zealand’s innovation funding now? The grants, the startup and founder support, and the support function for the research and development tax incentive are delivered by the Ministry of Business, Innovation and Employment, having transferred from Callaghan Innovation. The deep tech incubator programme is still with Callaghan pending legislation. Inland Revenue administers both tax instruments. Can you tell us whether our work is eligible? No. The incentive requires the activities to be approved before a claim, and that determination is Inland Revenue’s with your accountant’s advice. What we work on is how the programme of work is framed and recorded in advance, which is what the approval then reads. Do you have an office in New Zealand? No. We work with New Zealand founders remotely from Hyderabad, in English, and there is no local entity. We would rather say that than imply a presence we do not have. What on this page could not be verified? The current due dates for the incentive, because that page would not load for us. When the legislation completing the agency’s disestablishment is expected, and what happens to the deep tech incubator when it moves. And which products were retired, because the agency says a number were without saying which. Figures on this page were last checked on 20 October 2026 . ## Start with the repayment, not the refund. A 45-minute call with Dineshwara, scheduled in Auckland or Wellington time. 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