R&D Tax Incentive

R&D Tax Incentive

The Research and Development Tax Incentive is a joint initiative of the ATO, AusIndustry, and the Australian Government to encourage research and development.

Eligibility Requirements

• Entity Type: Must be a company incorporated in Australia, or a foreign company with a permanent establishment in Australia
• Expenditure Threshold: R&D expenditure must be at least $20,000 per income year
• Eligible Activities: Must be core R&D activities (experimental activities with technological uncertainty)
• Registration: Must register R&D activities with AusIndustry within 6 months of year end

Tax Offset Rates

• Smaller Companies (aggregated turnover under $20 million): 43.5% refundable tax offset
• Larger Companies (turnover $20 million+): 38.5% non-refundable tax offset
• Maximum Eligible Expenditure: $150 million per income year

What Qualifies as R&D?

Core R&D activities must involve:

• Experimentation or systematic investigation
• Technological or scientific uncertainty (outcome cannot be determined in advance)
• Generation of new knowledge, information, or technology

Examples include: developing new products, processes, or services; improving existing technology; software development with technical innovation.

Steps to Claim

1. Identify eligible R&D activities and expenditure
2. Register R&D activities with AusIndustry (within 6 months of year end)
3. Calculate notional deductions and offset amount
4. Lodge claim with ATO in your income tax return
5. Keep detailed records of R&D activities and expenditure for 5 years

Source: ATO ??? R&D Tax Incentive