This track is for finance managers, tax leads and accountants preparing an Australian R&D Tax Incentive claim in-house. The incentive gives companies a tax offset for eligible R&D expenditure and is jointly administered by the Department of Industry, Science and Resources, on behalf of Industry Innovation and Science Australia, and the Australian Taxation Office. Three things change the program's shape: two gates, registration and then the R&D tax incentive schedule in the company tax return; costs that become notional deductions; and an offset rate built on the company tax rate, aggregated turnover and R&D intensity.
How the Australia rules change the program
| Module | What is different in Australia | Country page |
|---|---|---|
| Scheme mechanics | A tax offset. Refundable: corporate tax rate plus an 18.5% premium, for aggregated turnover under A$20 million. Non-refundable: corporate tax rate plus 8.5% (R&D intensity up to 2%) or 16.5% (above 2%), for aggregated turnover of A$20 million or more. | Refundable vs non-refundable |
| Cost capture | Notional deductions for expenditure incurred on registered R&D activities, to the extent incurred on them, and for the decline in value of a tangible depreciating asset to the extent used for R&D. | Eligible expenditure |
| Staff time apportionment | Salary expenditure must be apportioned on a reasonable basis between R&D and non-R&D activities. | Eligible expenditure |
| Contractors and overseas costs | Expenditure incurred to an associate is notionally deductible only when it is paid. Activities conducted outside Australia are eligible only where covered by an Overseas Finding under section 28C, applied for before the end of the income year. | Advance and Overseas Findings |
| Grants and subsidised expenditure | A recoupment from an Australian government agency triggers a clawback adjustment that removes the premium benefit of the offset on the recouped expenditure. | Associates and feedstock |
| Calculations | A base rate entity taxed at 25 percent has a refundable offset of 43.5 percent; companies taxed at 30 percent have non-refundable offsets of 38.5 percent and 46.5 percent. | R&D intensity |
| Working with technical teams | Activities, not projects. A core R&D activity is an experimental activity whose outcome cannot be known in advance, proceeding from hypothesis to experiment, observation and evaluation, and leading to logical conclusions. | Core vs supporting activities |
| Filing and deadlines | Register with the department within 10 months of the end of the income year, for each income year, then complete the R&D tax incentive schedule with the company tax return. | Registration with AusIndustry |
| Reviews and audits | The department selects registrations for examination on a risk basis and its findings bind the Commissioner; the ATO reviews the expenditure and the calculation of the offset. | ATO and DISR reviews |
Forms and deadlines
| Form or step | Timing | Country page |
|---|---|---|
| Registration of R&D activities, through the customer portal accessed with myID | Within 10 months of the end of the income year, for each income year in which the activities are conducted. | Registration with AusIndustry |
| Advance Finding or Overseas Finding application | Before the end of the income year in which the activities are conducted. | Advance and Overseas Findings |
| R&D tax incentive schedule with the company tax return | Return due dates range from 31 October to 15 May after the end of the income year depending on the entity and whether it lodges through a tax agent. | How to claim |
| Amendment of assessment | Within 2 years for a small business entity or 4 years for other taxpayers, from the day the notice of assessment is given; extended where the Commissioner is awaiting a finding from the department. | ATO and DISR reviews |
| Records | Kept for 5 years from the date the return was lodged or the record was prepared, whichever is later. | Documentation |
Key rules to know
Registration is a gate, not a decision. Registration of activities does not amount to a decision that the activities are eligible R&D activities; the Board may later examine them and make a finding. The registration form requires for each core activity the new knowledge intended, the hypothesis, the experiment, how results were observed and evaluated, the conclusions and the estimated expenditure.
Notional deductions replace ordinary deductions. Expenditure that is notionally deducted under Division 355 cannot also be deducted under another provision, so the value of the claim is the premium over the company tax rate. Aggregated turnover includes the annual turnover of connected entities and affiliates, including foreign entities.
Changes have been announced but are not law. The 2026-27 Budget of 12 May 2026 proposed changes from 1 July 2028, including a 4.5 percentage point increase in offset rates for core R&D, removal of supporting R&D activities from eligibility and a refundable offset turnover threshold of A$50 million; these measures are proposed and not yet law, and the current rules apply until then.
Worked example
Illustrative example. Kimberley Instruments Pty Ltd, a hypothetical company with a 30 June 2026 income year, aggregated turnover of A$12 million and a company tax rate of 25 percent as a base rate entity, registers one core and two supporting activities through the customer portal by 30 April 2027.
| Cost | Amount | Treatment | Notional deduction |
|---|---|---|---|
| Engineers' salaries and superannuation, 60% of time on registered activities per timesheets | A$500,000 | Expenditure on R&D activities, apportioned | A$300,000 |
| Unrelated test laboratory | A$100,000 | Expenditure on R&D activities | A$100,000 |
| Related company's fee, invoiced June 2026, paid August 2026 | A$40,000 | Associate: deductible when paid | Nil this year; A$40,000 in the 2027 year |
| Materials consumed in trials | A$30,000 | Expenditure on R&D activities | A$30,000 |
| Decline in value of a test rig used 100% for R&D | A$20,000 | Decline in value, to the extent of R&D use | A$20,000 |
| Rent, apportioned by the laboratory's floor area at 20% | A$150,000 | Overhead, reasonable apportionment | A$30,000 |
| Interest on the equipment loan | A$5,000 | Cannot be notionally deducted | 0 |
| Total notional deductions | A$480,000 |
The A$480,000 is above the A$20,000 minimum. With aggregated turnover under A$20 million the offset is refundable at the corporate tax rate plus an 18.5% premium: 43.5 percent of A$480,000, which is A$208,800. Against an ordinary deduction worth 25 percent, A$120,000, the premium is A$88,800. Kimberley is in a tax loss for the year, so the A$208,800 is paid on assessment after the return and schedule are lodged by 15 May 2027.
Had Kimberley's aggregated turnover been A$60 million, taxed at 30 percent, with total expenses of A$16,000,000, intensity would be 3 percent: A$320,000 at 38.5 percent, A$123,200, plus A$160,000 at 46.5 percent, A$74,400, a non-refundable offset of A$197,600 with any unused amount carried forward.
Related country guide pages
Self-check questions
Answer each question, then open it to compare.
A company with a 30 June 2026 income year discovers eligible R&D work in June 2027. Can it claim the offset for that year?
Notional deductions are A$480,000 and aggregated turnover is A$12 million. The company is a base rate entity. What is the offset, and how does it compare with an ordinary deduction?
How is R&D intensity measured for the non-refundable offset, and how is the premium applied?
A related company invoices A$40,000 for R&D services in June and is paid in August, after year end. When can the expenditure be notionally deducted?
The company received a state government grant for part of the registered R&D expenditure. What adjustment applies?
Which agency decides whether registered activities are eligible, and what effect does its finding have on the tax assessment?
Official sources
- Overview of the R&D Tax Incentivebusiness.gov.au
- How to register for the R&D Tax Incentivebusiness.gov.au
- Rates of R&D tax incentive offsetAustralian Taxation Office
- Income Tax Assessment Act 1997, Division 355Federal Register of Legislation
- Industry Research and Development Act 1986Federal Register of Legislation
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Educational content only, not tax advice. See the disclaimer.