NZ-Audit-Checklist - Swanson Reed | Specialist R&D Tax Advisors

Section 1: Project Eligibility

1. What was the material purpose of your core R&D activity?

To resolve a specific scientific or technological uncertainty that wasn't publicly known. To create a new product or process using standard industry practices. To conduct market research, standard software upgrades, or develop a business process.

2. Could a competent professional in your field have easily figured out how to achieve your project's technical goals?

No, the solution wasn't readily available and couldn't be deduced without systematic research. Probably, with a bit of standard research and application of known scientific principles. Yes, it was a straightforward engineering or software development task.

3. Did your team follow a systematic approach to resolve the uncertainty?

Yes, we used a structured approach: forming a hypothesis or project plan, testing it, and evaluating results to guide development. We did some informal trial-and-error but didn't formally document the testing and evaluation process. No, we just built the final version based on our initial design.

Section 2: Expenditure Qualification

4. How did you determine the labour costs included in your claim?

We used timesheets or a reliable time-recording system to track the exact hours employees spent on core and supporting R&D activities. We made a good-faith estimate of each person's time at the end of the year based on their job description. We claimed a flat percentage of the entire technical team's salary costs without supporting methodology.

5. For staff who were not 100% focused on R&D, how did you apportion their time?

Our records clearly separate their eligible R&D activities from their routine, 'business-as-usual' duties. We estimated an apportionment split but lack detailed daily/weekly records to back it up. We claimed their entire salary, even though they spent time on commercial work or routine maintenance.

6. What other costs (e.g., consumables and overheads) are you claiming?

Only materials directly consumed in the R&D process, and specific overheads apportioned using a reasonable, documented methodology. We included general administrative costs without a clear link to the R&D activities. We claimed the cost of materials that went into final, commercially sold products (ignoring feedstock rules).

Section 3: Record Keeping

7. What kind of contemporaneous documentation do you have for the project?

We have detailed technical documents, testing logs, project meeting notes, and business cases that outline the initial uncertainty and the systematic work done. We have some scattered emails, presentations, and general project plans. We have very little documentation and would rely on the memory of the staff involved.

8. Can you easily link the costs in your claim to the specific R&D activities in your general ledger?

Yes, our accounting system is set up to track R&D expenses per project, and we can provide a clear audit trail to IR. It would take a lot of retrospective work to pull together the financial evidence from different places. No, our R&D costs are entirely mixed in with our general operational expenses.

9. Who was the "competent professional" leading the technical aspects of the project?

We have an identified individual with relevant qualifications and experience in the field who can explain the technological uncertainties to an IR auditor. The project was managed by someone without a deep technical background in this specific field. We don't have a designated technical lead for the project.

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Low Risk (0-10 points): Looking Strong

Your score is . Your answers suggest you have a robust process for claiming the R&D Tax Incentive (RDTI). Your documentation, cost tracking, and understanding of core/supporting project eligibility appear to be well-aligned with Inland Revenue's expectations.

Next Step: Continue your excellent record-keeping practices. Ensure your technical narrative clearly tells the story of your R&D project, from the initial uncertainty to the final conclusion.

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Medium Risk (11-25 points): Caution Needed

Your score is . Your claim may be valid, but there are potential weaknesses Inland Revenue could challenge, particularly around contemporaneous documentation or the apportionment of labour and overheads. You might be asked to provide more detailed evidence.

Next Steps: Focus on strengthening your documentation. Compile a technical summary retrospectively if needed, and review your cost calculations to ensure you have a reasonable and logical basis for any apportionments made. Consider having your claim reviewed by an RDTI specialist.

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High Risk (26+ points): Urgent Action Required

Your score is . Your answers indicate a high risk of your claim being rejected or investigated. There appear to be significant gaps in eligibility definition, cost calculation, or evidence. Submitting a claim in this state could lead to an Inland Revenue audit and potential penalties.

Next Steps: Do not submit your claim without a fundamental review. Critically re-evaluate whether your project meets the strict legislative definition of core R&D activities in New Zealand. You should urgently seek advice from a reputable RDTI specialist.

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