This FAQ provides general information about the Australian R&D Tax Incentive, including R&D refunds, eligibility, eligible costs, records and timing. It is not tax, legal or financial advice. Eligibility depends on your company, activities, expenditure, records and tax position.
The Research and Development Tax Incentive, often called the R&D Tax Incentive or R&DTI, is an Australian Government program that helps eligible companies offset some of the cost of eligible research and development activities.
It is designed for companies carrying out experimental work to resolve technical uncertainty and generate new knowledge. The benefit is usually claimed through the company tax return after eligible R&D activities have been registered.
No. The R&D Tax Incentive is not usually a grant paid upfront before the work begins. It is a tax offset claimed through the tax system.
For some eligible companies, the offset may be refundable. This means the company may receive a cash refund if the offset is more than the company’s income tax liability. For other companies, the offset may be non-refundable and used to reduce tax payable or carried forward, subject to the applicable rules.
The R&D Tax Incentive is generally available to eligible companies. Individuals, most trusts, partnerships and exempt entities generally cannot claim in their own right.
A company may need to consider additional rules if it is part of a group, has related entities, uses contractors, conducts work for another entity, or performs activities outside Australia.
Potentially, yes. The refundable offset can be particularly relevant for startups and early-stage companies that are investing in development before becoming profitable.
A loss-making company may receive a cash refund if it qualifies for the refundable offset and the offset exceeds its income tax liability. The outcome depends on the company’s turnover, tax rate, structure, eligible R&D expenditure, registration status and broader tax position.
Eligible R&D usually involves experimental work where the outcome could not be known in advance based on existing knowledge, information or experience.
A project may be worth reviewing if it involved technical uncertainty, a hypothesis, testing, trials, prototypes, iterations, observation and evaluation. Commercial innovation alone is not enough. The focus is on whether the company conducted eligible R&D activities.
Software, AI, automation and product development can qualify, but they do not automatically qualify.
These projects may need review where the company was trying to resolve a technical uncertainty through experimentation. Routine coding, configuration, ordinary implementation, bug fixing, cosmetic changes, market research or standard product improvement may not qualify unless they are directly connected to eligible R&D activities.
Eligible R&D expenditure may include costs connected to registered R&D activities. Depending on the circumstances, this may include staff costs, contractor costs, materials, certain overheads, depreciation or decline in value of assets used in R&D, and other costs linked to eligible activities.
Costs should be supported by records and apportioned where they relate partly to R&D and partly to ordinary business activities.
In general, a company needs at least $20,000 of eligible notional R&D deductions for the income year to claim the R&D Tax Incentive.
There are exceptions, including certain expenditure to a registered Research Service Provider and certain Cooperative Research Centre contributions. Companies below the threshold should obtain advice before assuming they can or cannot claim.
A company generally needs to register its R&D activities within 10 months after the end of the income year in which the activities took place.
For a company with a standard 30 June year end, this usually means the registration deadline is 30 April of the following year. Companies with substituted accounting periods should check their own deadline.
Companies should keep records showing both the R&D activities and the related expenditure.
Useful records may include project plans, technical reports, test results, prototypes, experiment logs, design documents, meeting notes, staff timesheets, contractor invoices, payroll records, accounting records and cost apportionment workings.
Records created while the work is happening are generally stronger than records prepared much later.
General information only. Not a government website. Eligibility depends on your company, activities, expenditure and records.