TAX • 29 JULY 2026 • 5 MIN READ

The difference between RDTI and RDTL and how to work out which is best for your business

If your New Zealand business is investing time, money, and brains into innovation, there are two tax incentives available to assist: the Research and Development Tax Incentive (RDTI) and the Research and Development Loss Tax Credit (RDTL).

While both schemes target innovation via R&D activities, they operate under completely different rules. Let’s break down how they work, how they differ, and most importantly how to figure out which one is the best fit for your current business stage.

An overview of the two schemes

RDTI

The Research and Development Tax Incentive (RDTI) provides a 15% tax credit on eligible R&D spend. If you are making a profit, it directly reduces your income tax bill. If you are making a loss, you can often still get this as a cash refund, though it’s capped based on the amount of payroll taxes (like PAYE) your business pays. Since it’s a substantial tax credit, it requires a pre-approval process, meaning you cannot just claim it.

RDTI is specifically built to support projects aimed at solving a scientific or technological uncertainty using a systematic, planned approach. To participate, you must hit a minimum eligible R&D expenditure of $50,000 a year (unless you use an Approved Research Provider), with a maximum cap of $120 million per year.

RDTL

The Research and Development Loss Tax Credit, (also referred to as the R&D Tax Loss Cash-Out) is specifically designed as a financial lifeline for early-stage, loss-making companies. It allows you to cash out your current year’s tax losses at a rate of 28%, giving you immediate operational cashflow when you need it most. However, think of this as a temporary, interest-free loan. You eventually have to repay it later when your company becomes profitable or if you sell the intellectual property or business. Unlike the RDTI, there is no pre-approval process. The claim is handled as part of your standard income tax return after year-end.

To qualify, your business must be registered as a New Zealand-resident company and carrying out eligible research and development activities. There is no minimum spend threshold for RDTL, which makes it accessible to smaller operations with limited budgets.

When to use each scheme

Since these initiatives have such different entry requirements, businesses usually lean towards one or the other based on their current business stage and project size.

When to use RDTI:

Your eligible annual R&D spend is at least $50,000 (and less than $120 million)
You have rigorous project-tracking systems in place to satisfy the IRD’s guidelines for scientific/technological uncertainty
Your business is profitable (or has minimal losses) and you want a credit against your tax bill

When to use RDTL:

Your business is a NZ-resident company in a tax loss position
You’re a startup or high-growth company but not yet profitable
You understand that any cash received under this incentive will need to be repaid later (either once profitable or if the business is sold or sells its intellectual property)

When to consider both:

Your business is in a loss-making position but your R&D expenditure exceeds your tax losses
You want to maximise the benefit of both incentives
You understand how both impact your business (i.e. what doesn’t need to be paid back vs which portion will eventually need to be repaid to the IRD)

How they work in practice

To show how they work, let’s look at 3 common scenarios.

The profitable innovator

Scenario: Spending $100,000 on eligible R&D
Best move: Claim RDTI
Outcome: Reduces the business’ tax bill by $15,000. Since the business is profitable, the RDTL isn’t an option as there’s no loss to cash out.

The early-stage pre-revenue company

Scenario: Loss-making company spending $30,000 on R&D
Best move: Claim RDTL
Outcome: Since the company is under the minimum threshold for RDTI, that is not an option. However, the RDTL has no minimum limit so the company can cash out the R&D loss at 28% to quickly inject cash back into the business.

The high-growth (but not yet profitable) scale up

Scenario: Loss-making company spending $200,000 on R&D
Best move: Claim both RDTI and RDTL
Outcome: If the business qualifies, both tax credits can be claimed. Apply for the 15% RDTI credit to receive a cash refund (up to the payroll tax cap) and use the 28% RDTL to cash out the remaining eligible tax losses. Combined, this can yield up to $43 cash back for every $100 spent on R&D.

Choosing the right option depends entirely on your business structure, annual R&D spend, and current profitability. Since the record-keeping and application rules differ significantly, getting your systems set up early and accurately can save a large amount of stress later on.

If you’re looking for an accounting firm that understands the R&D claims process, get in touch. Our team can help run the numbers, review eligibility and assist with the annual paperwork. Book a discovery call or get in touch via our contact form.

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