Research & Development Tax Incentive (R&D Tax Incentive)

Program Purpose and Overview

The R&D Tax Incentive is designed to encourage innovation and technological advancement by providing financial support to Australian companies investing in eligible research and development activities.

The R&D tax incentive provides cash refunds and tax offsets to eligible companies, with funding levels linked to company turnover and R&D intensity. For companies with an aggregated turnover under $20 million, a tax-free refund of 43.5% on eligible R&D expenditure is available. Larger companies with turnover exceeding $20 million receive a non-refundable tax offset ranging from 8.5% to 16.5%, depending on their R&D intensity. The program is jointly administered by the Department of Industry, Science and Resources and the Australian Taxation Office (ATO).

Key Details of R&D Tax Incentive

• Funding amount or range:
  • Refundable tax offset or refund of 43.5% for companies with a turnover of less than $20 million.
  • Based on R&D intensity, a non-refundable tax offset between 8.5% and 16.5% is available for companies with turnover over $20 million.
• Application open and close dates:
  • Applications must be lodged within 10 months of the company’s financial year-end.
  • For companies with a 30 June year-end, the deadline is 30 April 2026 for the 2025 financial year.
• Eligible industries:
  • A broad range of industries conducting R&D activities predominantly in Australia
  • Both startups and established companies can apply if they meet the eligibility criteria.
• Co-contribution or matching fund requirements:
  • No co-contribution or matching funds are required; the programme operates as a refundable tax offset based on eligible expenditure.
• Location/state/territory applicability:
  • Available to any companies conducting eligible R&D activities within Australia, regardless of state or territory.

Eligibility Criteria

• The applicant must be a registered Australian company.
• Conduct at least one core eligible R&D activity within Australia.
• Activities must involve systematic experimental processes to generate new knowledge or improve existing knowledge.
• Eligible R&D expenditures must meet a minimum threshold of $20,000 for direct claims; smaller expenditures may qualify if conducted via a registered Research Service Provider.
• Maintain comprehensive records and documentation to support R&D activities and expenses.

Eligible Activities and Expenses

• Experimental R&D activities aimed at generating new knowledge or improving existing products, processes, software and services
• Salaries and wages of technical and research personnel involved in R&D
• Costs of prototypes, materials, and supplies directly related to R&D projects
• Software and equipment used in experimental R&D processes
• Some associated overheads and indirect costs linked to eligible R&D activities
• Note: Marketing, export development, and capital costs unrelated to R&D activities are generally not eligible

Assessment Process

• The R&D Tax Incentive is a self-assessment programme; companies must assess their entity’s eligibility, activities, and expenditures before applying.
• The R&D project activities must be registered within 10 months of the company’s financial year’s end.
• Tax offset claims are lodged as part of the company’s annual tax return.
• Applications may be subject to review and audit by AusIndustry and the ATO to verify eligibility and accuracy.
• The programme is entitlement-based rather than competitive, provided eligibility and documentation requirements are met.

Application Tips

• Maintain relevant documentation, including project objective, technical reports, and financial records of R&D expenditure.
• Clearly define the technical uncertainties and innovative aspects of the R&D activities.
• Maintain thorough and contemporaneous records to support claims in the unlikely event of an audit.
• Register R&D activities promptly to avoid missing application deadlines.
• Align project objectives with the programme’s criteria and demonstrate the systematic experimental approach.
• Seek experienced professional advice to ensure compliance with legislative requirements and maximise claim potential.

Where to Get Help

Consider consulting a grant specialist for an eligibility assessment and expert assistance in preparing a strong, compliant and competitive application. Contact us today, and we will connect you with Australia’s best grant specialist with over 35 years of experience and a 100% success.