Short answers to the questions the academy is asked most about the Australian R&D Tax Incentive, grouped the way the country guide is organised: eligibility, costs and calculation, claiming and deadlines, and reviews. Each answer gives the rule in a sentence or two and links to the page that covers the subject in full, with the official sources. This page carries FAQPage structured data.
Eligibility
Who can claim the R&D Tax Incentive?
Corporations incorporated in Australia, foreign corporations that are Australian residents for tax purposes, and some foreign corporations carrying on business through a permanent establishment in Australia. You must spend at least A$20,000 on eligible R&D in the income year, unless you use a research service provider or contribute to the Cooperative Research Centres Program. Trusts, partnerships and individuals cannot claim. See eligibility.
What is a core R&D activity?
An experimental activity whose outcome cannot be known in advance from current knowledge, that follows a systematic progression of work from hypothesis to experiment, observation and evaluation, leading to logical conclusions, and is conducted to generate new knowledge. See core versus supporting activities.
What is a supporting R&D activity?
An activity directly related to a core activity. Where it produces goods or services, or is one of the excluded activities, it must be undertaken for the dominant purpose of supporting the core activity. See core versus supporting activities.
Is our software development eligible?
Only the parts that are experiments to resolve a technical unknown. Software for the internal administration of your own business is excluded from core activities by the legislation, and routine development using known methods is not an experiment. See industries.
Can we claim for work done overseas?
Only with an Overseas Finding from the department, applied for before the end of the income year in which the activity is conducted, and only where the overseas spend is less than the Australian spend across the project. See advance and overseas findings.
Costs and calculation
Which costs count?
Expenditure incurred on registered activities, including salaries, contractors, consumables and apportioned overheads, plus the decline in value of assets used for R&D. Interest, buildings, core technology and expenditure above A$150 million a year are excluded or limited. Payments to a research service provider registered with the department also count, and where the R&D is done by a provider the A$20,000 minimum spend does not apply, although the company still registers the activities itself. See eligible expenditure.
How much is the offset worth?
For aggregated turnover under A$20 million, a refundable offset of the corporate tax rate plus an 18.5% premium: 43.5% for a company taxed at 25%. For aggregated turnover of A$20 million or more, a non-refundable offset of the corporate tax rate plus 8.5% for R&D intensity up to 2%, or plus 16.5% above 2%. See refundable versus non-refundable.
What is R&D intensity?
Notional R&D deductions as a proportion of total expenses for the year. It decides which premium a larger company receives. See R&D intensity.
What is aggregated turnover?
The company's turnover plus that of entities connected with it and its affiliates, worldwide. A subsidiary of a large group fails the A$20 million test even if it is small itself. See refundable versus non-refundable.
We paid a related company for R&D work. When can we claim it?
Expenditure to an associate is notionally deductible only when it is paid. See associates and feedstock.
Claiming and deadlines
Is the offset taxable income?
No. The expenditure is notionally deducted rather than deducted, and the offset replaces the tax saving the deduction would have given. The net value of the incentive is the premium: 18.5 cents in the dollar for the refundable offset and 8.5 or 16.5 cents for the non-refundable offset. See refundable versus non-refundable.
Do we have to register before we claim?
Yes. Register R&D activities with the department within 10 months of the end of the income year, then claim the offset in the company tax return through the R&D tax incentive schedule. See registration with AusIndustry.
What if we miss the registration deadline?
The department can extend it only in limited circumstances. Without an extension there is no registration and no offset for that year. See deadlines.
Can we claim the offset in a later return?
The offset belongs to the income year of the expenditure. If omitted, it can be added by amending that year's return within the amendment period, provided the activities were registered for that year. See deadlines.
Reviews
Who reviews our claim?
The department can examine the registered activities and issue a finding on their eligibility, which binds the ATO. The ATO can review the expenditure and the calculation. Both want records made at the time: the hypothesis, the experiments, the results and the conclusions, and the link from costs to activities. See ATO and department reviews and documentation.
Related pages
Official sources
Educational content only, not tax advice. See the disclaimer.