Callaghan boss responds to govt change in R&D funding

R&D tax incentives announced in Budget

Callaghan Innovation CEO Victoria Crone says the organisation is ready to “pivot” to accommodate the Government’s new direction for investing in R&D - moving away from grants in favour of tax incentives.

Research, Science and Innovation Minister Megan Woods and Revenue Minister Stuart Nash announced plans to introduce R&D tax credits in the Budget last week, claiming this will “help us transition away from the current growth Grants model, which is available to a narrower range of firms.”

“Government is putting $1.0 billion of operating expenditure over four years on the table to finance an R&D tax incentive, giving eligible businesses 12.5 cents back for every dollar they spend on R&D. This funding will be available to all businesses spending more than $100,000 a year on R&D.”

The growth Grants model has been administered by Callaghan Innovation, an organisation set up by the previous National Government. It was formed in February 2013 by combining the former crown research institute IRL, MBIE’s business investments team, the Auckland Foodbowl, and NZTE's Lean Manufacturing programme.

Speaking to Computerworld yesterday, following a Techweek event about creating a business case for a trans-Tasman Innovation Ecosystem, Crone was upbeat about the change.

“We’re up for investment in R&D. We know that it is a challenge in New Zealand. Callaghan Innovation is like any other organisation, things change,” Crone says.

“In regards to R&D tax incentives, it’s still under consultation so we don’t know the final form of it. But Callaghan Innovation is thrilled to see increased investment in it. R&D tax incentives play a real role in growing and supporting R&D,” she says

A discussion paper on the R&D tax incentives has been issued by the Ministry of Business, Innovation and Employment, with submissions closing on 1 June.

Crone says whether there will be any changes to Callaghan Innovation has yet to be decided.

“Our organisation has the ability to pivot and support other areas that need support. And that includes a lot of other things we’re doing in terms of student grants, project grants, also our programmes in terms of helping build innovation capability, our scientists and then the offshore delegations.”

When asked to comment about the Venture Capital space in New Zealand in general, Crone noted that it is fledgling. “If you look at the same space in Australia and how there has been significant growth in the dollars per citizen in the VC space, New Zealand is flat. The issue is that we have a gap in the $2m - $20m space in terms of funding. So, for businesses, their ideas can get off the ground using Angel investment and there is some capital around, [but] we’re about, they estimate, $300-400 million short in that Series A funding and above.”

Meanwhile, a spokesperson from Wood’s office says that “businesses with an active Growth Grant on 31 March 2019 will continue receiving their grant until 31 March 2020. The Growth Grant scheme will be closed to new applicants on 31 March 2019.

“A temporary grant scheme mirroring the R&D Tax Incentive will be implemented to provide support for Growth Grant recipients with insufficient tax liability to use an R&D tax credit immediately. The proposed approach is to ensure a smooth transition for Growth Grant recipients to the R&D tax incentive in a way that supports businesses to maintain and grow their R&D programmes over time.”

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