If your company is building something new (a product, a process, a piece of software) the government may already owe you money for it. The R&D Tax Incentive (RDTI) is Australia’s largest innovation program, jointly run by the ATO and AusIndustry, and it turns eligible development spend into a tax offset. The catch is that the rules are technical and weak claims attract scrutiny, so it pays to understand what genuinely qualifies before you lodge.
Who can claim
The incentive is for companies; sole traders, partnerships and trusts generally cannot claim directly. You must be an incorporated R&D entity, carry out at least one eligible "core" R&D activity, and have spent at least $20,000 on eligible R&D during the year (the minimum is waived if you use a registered Research Service Provider).
What counts as R&D
This is where most claims succeed or fail. Eligible work splits into two types, and only genuine experimentation qualifies; routine work, market research and software customisation usually do not.
- Core activities: experimental work whose outcome cannot be known in advance, resolved through a systematic progression from hypothesis to experiment to evaluation
- Supporting activities: work directly related to and undertaken for the core activities, such as background research, prototyping or testing
How much you get back
The rate depends on your company’s size. Companies with an aggregated turnover under $20 million receive a refundable offset of 43.5%. And because it is refundable, you can receive cash back even in a loss year. Larger companies receive a non-refundable offset at a premium above their company tax rate, tiered by how R&D-intensive their spending is.
What expenditure you can include
Once activities are eligible, you claim the expenditure that relates to them, apportioned honestly where staff or assets are only partly on R&D.
- Salaries and on-costs for staff working on R&D
- Contractor and consultant fees for eligible work
- A share of overheads such as rent, power and software
- Decline in value of assets used in R&D activities
Registration and deadlines
You must register your activities with AusIndustry before you claim. And the deadline is firm: within 10 months of the end of your income year (by 30 April for a standard June year-end). Registration is separate from, and must come before, the R&D tax schedule you lodge with the ATO alongside your company tax return. Miss the window and the claim is gone for that year.
Make the claim worth making
The single biggest driver of a smooth claim is contemporaneous records: notes, test results and timesheets captured while the work happens, not reconstructed a year later. Done properly, the RDTI is one of the few incentives that rewards the work you were already going to do. Done loosely, it invites a review. If you are developing something genuinely new, it is worth getting the eligibility assessed before you spend another year leaving it on the table.