Research And Development Tax Offset

Grant Information

The R&D Tax Incentive is open to all Australian companies irrespective of their turnover or profits / losses. The scheme is most favourable to companies with losses and a turnover of less than $20 million. By complying with the R&D requirements these companies are entitled to a tax free refund of up to 43.5% of their R&D costs each year. This program can also have the benefit of reducing the amount of company tax that would otherwise be payable.

The two Core Components are:

a 43.5 per cent tax free cash refund to eligible entities with an aggregate group turnover of less than $20 million pa
a non-refundable 38.5 per cent tax offset to all other eligible entities.

The scheme allows for up to 50% of the eligible R&D activities to be conducted overseas under some circumstances.

The R&D Tax Incentive scheme offers companies with an aggregate group turnover of less than $20 million with a tax free cash refund of 43.5% of their eligible R&D Tax expenditure. The refund may be reduced if the company has unpaid tax liabilities including GST, FBT and withholding taxes. Where the aggregate group turnover exceeds $20 million the company can access a 38.5% non-refundable credit to reduce the company tax that would otherwise be payable. This initiative may assist your company by providing timely support and increased cashflow when most needed.

The R&D Tax Incentive is available to:

a company incorporated under an Australian law;
a company incorporated under a foreign law that is an Australian resident for tax purposes; or
a company incorporated under a foreign law that is a resident of a foreign country with a double tax agreement with Australia and who carries on business through a permanent establishment of the body corporate in Australia.

Trusts are generally not eligible for tax benefits under the R&D Tax Incentive. The one exception is a body corporate acting as trustee of a public trading trust. If you are in doubt as to whether you are an eligible entity, please contact Pattens at grants@pattens.com

Applications for registration of R&D activities must be lodged with AusIndustry within 10 months after the end of the company’s income year in which the activities were conducted.

Activities are eligible if they meet the definition of R&D activities. R&D activities are defined as either ‘core’ or ‘supporting’ R&D activities. Core R&D activities are experimental activities where:

the outcome cannot be known or determined in advance on the basis of current knowledge, information or experience, but can only be determined by applying a systematic progression of work that:
is based on principles of established science; and
proceeds from hypothesis to experiment, observation and evaluation, and leads to logical conclusions; and
that are conducted for the purpose of generating new knowledge (including new knowledge in the form of new or improved materials, products, devices, processes or services).

Supporting R&D activities are activities directly related to core R&D activities.

Companies must have incurred notional deductions for an income year of at least $20,000 to claim a tax offset.

We have over 30 years of experience claiming grants with a 99% success rate!

To arrange a meeting with one of our accredited experienced grants managers please contact us today at 1800 PATTENS or grants@pattens.com or fill out this form.

A research and development tax offset or cash refund can provide valuable support for businesses looking to innovate without placing a strain on their finances.

As a form of non-dilutive funding, it enables eligible companies to invest in new products, processes or technologies without surrendering equity or control. For boards and financial decision-makers, this distinction is significant, as it strengthens cash flow while preserving long-term ownership and enterprise value.

Many financial decision-makers carefully balance the need to invest in new products or improvements while keeping everyday costs under control. Businesses can apply for tax incentives for research and development, providing a tax offset for eligible development work and allowing companies to pursue innovation with confidence.

Pattens Group brings long-standing experience in helping Australian businesses understand and access these opportunities, so you can pursue innovation with greater confidence and peace of mind.

You want to determine if the R&D tax offset fits your innovation plans.

What is the research and development tax offset?

The R&D tax credit in Australia helps locally based businesses reduce the cost of investing in research and development by providing a tax offset. Managed jointly by the Australian Taxation Office (ATO) and the Department of Industry, Science and Resources, the program requires businesses to register their R&D activities before making a claim.

How can the R&D tax offset help businesses and companies?

R&D grants and tax incentives are designed to boost productivity and keep businesses competitive by encouraging research and development. They’re particularly valuable for smaller businesses that may be cautious about committing time and money to new ideas, as they offer more predictable support and clearer processes.

Finance and technical teams often consider the R&D tax offset during budgeting and planning stages to understand how it can support future projects.

You want to understand the process without getting overwhelmed.

Many businesses look for clearer guidance on how to claim R&D tax offset in Australia, as government documentation can be difficult to interpret. With that in mind, an organised, step-by-step approach provides structure and sets a strong foundation for claiming your tax offsets with confidence.

Confirm your eligibility.

First, confirm that your business is eligible for R&D government grants or incentives. This means being an eligible R&D entity, having carried out qualifying R&D activities during the income year since claims are logged annually, and registering those activities with AusIndustry before lodging your company tax return.

You will also need to incur at least $20,000 worth of eligible R&D activities during the income year to support your R&D tax incentive application. Verifying these details early helps prevent issues later on.

Check if you are controlled by any exempt entities.

Determine whether your company is controlled by any exempt entities. If it is, your business will generally be limited to claiming the non-refundable development tax rebate. This distinction is important, as it directly affects which offset you can access and how your claim is structured.

Calculate your aggregated turnover.

Next, calculate your aggregated turnover, which includes the income of any connected or affiliated entities. This total plays an important role in determining which innovation or research tax support may be available to your business.

Determine which tax offset applies to your business.

If your business is controlled by exempt entities or has an aggregated turnover of $20 million or more, you may be eligible for a non-refundable tax offset. Conversely, if your aggregated turnover is under $20 million, a refundable offset may apply instead.

Calculate the offset amount.

Determine the value of your research and development tax offset by calculating your eligible R&D activities. These include the R&D expenses that you can claim, contributions made under the Cooperative Research Centres Program, and decline in value on your R&D assets.

Off-shore activities may also qualify for this incentive, provided they meet the requirements:

It must be a core or supporting R&D activity.
It must have a scientific link to an Australian core R&D activity.
It must not be able to be conducted in Australia.
The costs must be less than the costs of related R&D activities done solely in Australia.
The activities must be supported by an Advanced Overseas Finding, which must be submitted before the end of the income year during which the activity is conducted.

Lodge your claim.

To successfully lodge your claim for research tax incentives, it’s important to complete the required schedule accurately and submit it with your company tax return to the Australian Taxation Office. For a smooth process, you must include all necessary details, including your unique AusIndustry registration number for the year on your R&D tax incentive schedule, before lodging the form.

Explore your pathways to success with Pattens.

As business advisers for grant applications and tax incentives, we support businesses across a wide range of industries by helping them navigate Australia’s complex funding landscape. If you’re looking to apply for a tax offset, we can help ensure compliance by building a defensible claim with robust documentation that withstands ATO review.

Drawing on more than 35 years of experience, we provide clear, practical guidance and a No Win, No Fee approach. Our strong track record across competitive grants and providing expert help with R&D tax incentive claims gives businesses confidence to pursue funding that aligns with their goals.

Whether you’re still exploring ideas or ready to move forward, we can help streamline the process by providing thoughtful, individualised guidance tailored to your situation.

Frequently Asked Questions (FAQ)

How does the research and development tax offset differ from other government grants?

The Research and Development Tax Incentive is a tax-based incentive that operates each year through the tax system and is based on eligible spending.

Simply, because it is not drawn from a limited funding pool, tax offsets can offer some certainty and predictability regarding possible access when planning ahead.

Unlike competitive government grants for companies, the R&D Tax Incentive is entitlement funding, which means businesses can access the financial incentives if they meet the criteria and provide the required documents.

If the research and development tax offset is not the right fit for your business, we can help you explore other funding options available for your industry or goals. These programs are usually more competitive and have tighter eligibility requirements, but can still provide valuable support in the right circumstances.

Can software and technology companies claim the research and development tax offset?

Yes. In many cases, eligible software and technology companies can claim a tax offset. Technology businesses working on new algorithms, platforms, or system designs may qualify for it, as long as the work meets the program’s requirements.

That said, not all software development is eligible. R&D tax specialists can clarify whether your work meets the necessary criteria and explain your options in clear, practical terms. You can also check your eligibility using our online tool.

How much internal effort is required to claim the research and development tax offset?

Claims often require close coordination between technical and finance teams.

Carefully recording activities, costs, and outcomes can take considerable time and may place extra demands on senior staff. To keep day-to-day operations running smoothly without overloading internal teams, many businesses choose to work with experienced specialists at Pattens.

Explore grants for sustainable growth with our specialists.

We provide R&D tax claims advice that is clear, concise, and manageable for Australian businesses.

We take the time to understand your goals and carefully match them with the right funding opportunities, drawing on experience from reviewing more than 1,200 available grants, such as the Export Market Development Grants (EMDG) program, the R&D tax offset for SMEs, and more. And because we work on a No Win, No Fee basis, you only pay if your application is successful.

With us by your side, your business tax planning can move forward with confidence.

Check your eligibility today.

Disclaimer: Information provided is general in nature and does not constitute financial or tax advice. Eligibility for government grants and incentives is subject to program guidelines and assessment by relevant authorities.