Bay of Plenty Business News April/May 2018

14 BAY OF PLENTY BUSINESS NEWS April/May 2018
Funding growth
and innovation
According to Stats NZ’s latest Business Operations survey, 40
percent of businesses cite cost as the main barrier to innovation
in New Zealand. Lack of management resources and not having
appropriate staff followed closely behind at 38 percent and 31
percent respectively.
While cost is the key
impediment, the
encouraging news is
that businesses’ expenditure on
R&D is continuing to grow
with the private sector spending
$1.8 billion on R&D in the
year to August 2017, up from
$1.6 billion in 2016.
Not so encouraging is the
fact that NZ still lags significantly
behind the OECD average.
R&D is critical to NZ’s
sustained economic growth –
research indicatesg that a one
percent increase in business
R&D can lead to a 0.04 percent
increase in GDP.
For businesses looking to
invest in R&D, the government
offers a number of grants
and funds, together with a supportive
tax regime introduced
by the former government for
companies that make losses
during their growth and innovation
journey.
Additionally, the Labour
REGULATORY MATTERS
> BY GRANT NEAGLE
Grant Neagle, a director at Ingham Mora Chartered Accountants
in Tauranga, is a business advisor and tax specialist. He can be
contacted on 07- 927- 1225 or grant@inghammora.co.nz
Government has recently
announced plans to introduce
a non-refundable R&D
tax credit from April 1, 2019
(see http://www.mbie.govt.nz/
info-services/science-innovation/rd-tax-incentive).
After taking power in the
2008 election, the National
Government repealed Labour’s
previous R&D tax credit
regime, believing that businesses
would merely recharacterise
existing R&D expenditure
to obtain the credit. It
seems the Labour Government
is intent on reintroducing a
tax credit regime under a new
guise. Whether it addresses
the concerns the National
Government had with the old
regime remains to be seen.
R&D tax losses
Introduced in 2016 to encourage
innovation and high-risk
investment, the current R&D
loss tax regime allows companies
that have tax losses to
exchange these for cash with
the IRD.
Capital and cash-flow constraints
can be large impediments
to businesses seeking to
innovate and grow. Before the
regime was introduced, companies
that made a tax loss
could only get the benefit of
the loss in future years when
they derived income against
which the loss could be offset.
The problem was that it
would often take companies
years before they got a product
or service to market that
returned a profit. Even then
there was no guarantee that
given the high-risk nature
of their businesses that they
would survive long enough to
turn a profit.
The regime provides a solution
to this problem. It allows
tax losses arising from eligible
R&D expenditure to be
refunded in cash to the company
annually, thus providing
welcome capital and cashflow.
Companies need to meet
certain criteria to be eligible
to claim the cash, one of these
being that the company must
have spent at least 20 percent
of wages and salaries on qualifying
activities. Further, the
cash obtained cannot exceed
the overall tax loss amount
or certain thresholds of R&D
expenditure incurred.
The maximum cash amount
for the 2018 income year is
$308,000. The maximum cash
amount an eligible company
can obtain will continue to
increase by $84,000 annually
culminating in $560,000 for
the 2021 and subsequent years.
For now the Labour
Government intends to leave
this regime in place but has
signalled that it may review it
in future. Any changes would
not be made until after 2020.
Grants and funding
Callaghan Innovation is a New
Zealand Government agency
tasked with increasing R&D
investment. It offers several
grants.
Getting Started Grants
– aimed at businesses in the
early stages of R&D, or those
that are new to R&D. They
assist businesses to take their
product and services from the
R&D phase through to commercialisation.
Businesses are
eligible to receive up to 40
percent of their eligible R&D
up to $5000.
Project Grants – Tailored
toward specific business projects
aimed at the development
of new or substantially
improved products and services.
Businesses typically
receive up to 40 percent of
their eligible R&D costs.
Growth Grants – Aimed at
helping experienced R&D businesses
add scale to their current
R&D investment and so
obtain greater market impact.
Typically, a three-year grant programme
that can be extended by
another two years, where businesses
can receive 20percent of
their eligible R&D expenditure
up to a cap of $5 million p.a.
An additional $74.6 million
of funding provided by the former
National Government in
Budget 2017 means there is a
total of $657 million over four
years available through the
Growth Grant’s programme.
Student Grants – Provides
access to post and undergraduate
students to assist
with R&D.
The Ministry of Business,
Innovation and Employment
(MBIE) also provides
grants and funding to businesses
to support innovation
through R&D.
The Endeavour Fund –
funding is available through
two mechanisms: 1) Smart
Ideas for promising, innovative
research with high potential
to benefit NZ. Businesses
can request between $400,000
to $1 million over 2-3 years;
and 2) Research Programmes
– aimed at more credible
research ideas that have high
potential to benefit NZ in areas
of future value, growth or critical
need.
The Catalyst Fund – Is
available to support activities
with foreign research partners
that improve the quality of
NZ’s science and innovation.
Government grants and
funding and the R&D tax loss
regime are invaluable means
of providing support to cash
strapped, R&D focused businesses.
Businesses should be
taking advantage of these as
well as the broader commercial
support the Government
provides.
The comments in this article
are of a general nature and
should not be relied on for
specific cases, where readers
should seek professional advice.
Five technology trends to watch
May is Tech Week, which offers a number of events and
opportunities to see developers, producers and suppliers of
the latest in the tech world.
TECH TALK
> BY TONY SNOW
Director Stratus Blue Ltd. Tony@stratusblue.co.nz | Mobile
022 122 8669 T 07 777 0010.
What is clear is that previous
innovations are
now becoming mainstream,
and Tech Week may
well showcase developments
which will become the next
big thing for businesses.
With that in mind, here are
some trends that are already
or are likely to affect us as
business owners/ operators and
as people.
Our changing interaction
with technology. There is a
continuing shift from desktop
to mobile.
This means that all businesses
must deliver a good
mobile experience, from
employees and servicing, to
attracting clients with a website
and apps that work seamlessly
on phones and tablets.
There is a rise of voice
searches and voice commands
(‘Hi Alexa!, ‘Ok Google’), and
the advent of virtual reality
(VR) and augmented reality
(AR) means technology interfaces
will become more and
more immersive.
Companies that start to
develop VR and AR experiences
are very likely to reap
the rewards in the longer term.
The rise of artificial intelligence.
AI technology may
seem beyond the reach of the
average business, but platforms
like IBM’s Watson are
opening up AI and machine
learning to a much wider audience.
In fact, there are many
start-ups who are applying AI
technology to a wide range
of industries and applications,
from marketing to healthcare.
So if you have decisions,
processes or systems that could
be automated, it’s well worth
considering whether intelligent
machines could help.
Big data. Businesses that
don’t take advantage of Big
Data will be left behind.
One significant trend has
been the move towards the
delivery of tools and technology
through software-as-a-service
platforms.
By tapping into data from
these big platforms, and partnering
with a smaller software-as-a-service
provider,
any organisation can leverage
the explosion in data to build
a smarter, more successful
business.
As we have seen, when it
comes to the data itself, the big
tech companies like Google
and Facebook offer a wealth
of data on potential customers,
and useful tools for interrogating
that data. But companies
need to be aware that privacy
and security are becoming an
increasingly significant concern
for users.
The Internet of Things.
IoT technology gives companies
incredible opportunities
for new products and services
and ways to optimise decisions
and operations.
How can you best use IoT
technology in your organisation?
Given the wide span of
opportunities, many companies
don’t know where to begin.
The most important thing is
to consider how the IoT can be
linked to your business strategy,
how it can help your business
achieve its strategic goals,
and where it might deliver the
biggest business value.
Leveraged in a strategic
way, the IoT can help propel
your business towards achieving
its goals.
Automation. As any business
consultant will tell you,
anything that can be streamlined
or automated, probably
should be.
If a robot or machine can
do a task quicker, cheaper, easier
and more accurately than a
human, why shouldn’t it? That
logic applies to businesses big
and small.
This may eventually
mean harnessing human brainpower
for the quirkier problems
and more creative aspects
of business, and automating
processes that are best suited
to machines.