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

Program Overview

The Research and Development Tax Incentive (R&D Tax Incentive) is a flagship Australian Government programme designed to encourage innovation and technological advancement by supporting companies investing in eligible research and development activities in Australia. The programme aims to stimulate economic growth by fostering innovation, increasing competitiveness, and generating new knowledge that benefits the Australian economy.

The incentive provides 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 refundable tax offset of 43.5% on eligible R&D expenditure is available, potentially resulting in a cash refund. 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

• Funding amount or range:
  • Refundable tax offset 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 2025 for the 2024 financial year.
• Eligible industries and company types:
  • A broad range of industries and company types are conducting eligible R&D activities 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 tax offset based on eligible expenditure.
• Location/state/territory applicability:
  • Available to 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.
• Self-assessment of eligibility for the entity, activities, and expenditure is required before registration.

Eligible Activities and Expenses

• Experimental R&D activities aimed at generating new knowledge or improving existing products, processes, or 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 Department of Industry, Science, and Resources must register R&D activities within 10 months of the financial year’s end.
• Tax offset claims are lodged with the ATO as part of the company’s annual tax return.
• Applications are 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

• Prepare detailed documentation, including project proposals, 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 event of audits.
• 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 professional advice to ensure compliance with legislative requirements and maximise claim potential.

Companies are encouraged to seek expert guidance from a professional grant advisor such as Pattens Group. We can help navigate complex eligibility criteria, prepare robust applications, and ensure compliance with regulatory requirements, thereby enhancing the likelihood of successful claims and maximising the benefits of the R&D Tax Incentive programme. Engaging Pattens as a professional support is a strategic investment to leverage this valuable government incentive fully.

Pattens Group can help protect your company from costly setbacks, maximise your claim’s value, and streamline the application process through their technical expertise, regulatory knowledge, and practical experience with R&D Tax Incentive claims.