The New Zealand Government has set aside $1 billion for a new tax incentive which aims to unlock further spending on research and development while driving innovation.

Research, Science and Innovation Minister Meagan Woods noted that this is a huge opportunity for businesses to invest in R&D.

“We listened to the business community… The rate will be higher, the threshold lower, and the definition more inclusive,” Woods said.

“We pride ourselves on being an innovative country, but our spending on R&D lags behind many of our international competitors, and this Government is not content to languish at the bottom of the table.”

The changes include a halving of minimum R&D expenditure threshold to qualify for the tax incentive, a credit rate of 15 per cent, up from 12.5 per cent, and a more user-friendly definition of R&D to be more easily accessible across all sectors.

Business advocacy body BusinessNZ chief executive Kirk Hope said that halving the investment required from $100,000 to $50,000 will place the incentive in the reach of far more small businesses.

The Employers and Manufacturers Association (EMA) agreed that small businesses in particular will benefit from these changes, as well as and knowing in advance that an application for the tax incentive has been approved, rather than waiting on the outcome at the end of the year.

“These key aspects of the scheme are close to what we believe will encourage more R&D in New Zealand firms,” EMA chief executive Kim Campbell said.

“As a country we suffer on the global stage from a lack of innovation in our products and services and business practices… The scheme will encourage new business development, more employment, higher wages and GDP growth.”