The R&D tax incentive program has seen some changes recently by the Government. With these changes made, it will surely affect how businesses can claim R&DTI for their innovative work. As a business owner or manager, you need to know these changes to get the most from the R&D tax incentive program and avoid the problems you may face in claiming it.
What’s New in the R&D Tax Incentive 2025
No More Benefits for Gambling and Tobacco
From July 1, 2025, R&D activities related to gambling and tobacco won’t qualify for tax benefits. The Australian Government wants to direct funding to areas with better social outcomes. It’s time to rethink your R&D plans if your business falls in the Tobacco and Gambling industries and you are conducting R&D research.
Government Review of the Program
The Australian Government started a “Strategic Examination of Research & Development” in February 2025. You can share your thoughts until April 11, 2025. This review checks if the program works well and matches national priorities like sustainability and advanced manufacturing. The results could bring more changes later in 2025.
Public Reporting of R&D Tax Incentive Claims
The Australian Taxation Office (ATO) published its first R&D Tax Incentive Transparency Report in October 2024. The report showed that 11,545 companies claimed $11.2 billion in R&D spending. Your claims might now be visible to the public, so accuracy is more important than ever.
More Checks on R&D Claims
The ATO and the Department of Industry, Science, and Resources work together to check R&D claims more carefully. They look at both what you claim and how much you claim. You need strong proof to back up your application.
More Explicit Rules for Software Projects
Software development has always been tricky for R&D claims. New guidelines make what counts as eligible R&D in software more apparent. New algorithms and machine learning models usually qualify. Bug fixes and design changes typically don’t.
Examples of Different Industries
Machine Learning (ML) and software development are two of the industries that have examples published by the Australian Government. You can learn how to structure your R&D claims effectively for your business type by looking at these published examples.
More Support for Green Projects in 2025
According to recent changes made by the Government, clean energy and sustainability initiatives are now focused and eligible for R&D tax incentives. This support aligns with Australia’s objectives, which include halving carbon emissions by 2050.
Online Applications Only
All R&D tax incentive applications must now be submitted through the online AusIndustry Customer Portal. This makes processing faster and lets you track your application.
How the Key Changes R&D Tax Incentive 2025 Affect Your Business
Small and Medium Businesses
Positive Update:
- Better guidelines are available to organise your claims better.
- Access is made easier because there is no minimum spending requirement.
Challenges:
- With limited resources, it may be difficult for businesses to implement stricter inspections.
- You should change how you submit applications.
Large Companies
Positive Update:
- The use of digital systems simplifies complex applications
Challenges:
- Large claims are more likely to be audited.
- Gambling and tobacco work will get no benefit
- Potential changes in the future may impact funding caps.
All Businesses
Positive Update:
- Public reports show you industry standards
- Clearer guidelines reduce confusion
- Digital tools make record-keeping easier
Challenges:
- You need more detailed documentation
- Rules keep changing, so you must stay updated
- You need to remain flexible for future changes
What to Do Next to Claim the R&D Tax Incentive in 2025
1. Check Your Projects
Compare your R&D activities to the recent R&D updates and guidelines. Please ask yourself:
- Are you working on any projects that fall in the Tobacco or Gambling industries?
- Are you actually fixing technical problems when you work on software?
- Can you transfer some R&D into green technology?
If you are unsure what meets the criteria, please contact Pattens Group today. Click here to book a free consultation.
2. Keep Better Records
Good documentation is now a must:
- Digital tools are the best way to track your experiments and costs
- Keep detailed notes about technical problems and solutions
- Save all related emails, meeting notes, and technical details
- Try cloud-based tools to keep all R&D records in one place
Remember to keep records for at least 5 years after your claim. Make them detailed enough to pass an audit.
3. Get Expert Advice
Professional advice can save you trouble.
- Talk to R&D tax experts like Pattens Group before you submit the R&D claims
- Get legal help with agreements for all university partnerships.
- Stay informed about the strategic review through industry groups.
Also read: Beyond Innovation: How the R&D Tax Incentive Can Fuel Your Business Growth
Act Now on the Key Changes R&D Tax Incentive 2025
The R&D Tax Incentive program offers superb financial benefits for businesses that invest in innovation. However, you need to be aware of the new rules by the Australian Government and adapt quickly.
Start by checking your current R&D work against the updated guidelines. Find any areas that need changes. Next, make sure your record-keeping procedures are sufficiently solid to survive increased scrutiny. Spending money on expert advice now will save you money in the long run compared to having claims rejected entirely.
The deadline for submission of your R&D tax incentive claims for FY24 is 30 April 2025 is approaching, and businesses are advised to take action immediately to ensure their innovation work gets the government funding it deserves.
FREQUENTLY ASKED QUESTIONS (FAQs)
What specific documentation will the ATO require for R&D claims under the new guidelines in 2025?
While there are no additional documentation requirements for 2025, it is still essential to maintain accurate and up-to-date records to ensure compliance and make the most of the R&D Tax Incentive.
How will the upcoming changes from the Government’s review in 2025 directly impact the current R&D tax incentive framework?
The most recent updates and reforms in the R&D tax incentive focus on compliance, transparency, and alignment with national innovation goals. All businesses, even SMEs, are subject to increased sector-specific scrutiny and stricter documentation requirements. Your business’s success or failure in Australia’s dynamic R&D environment will depend on how proactive you are in adapting to these changes.
What resources are available to assist businesses in adapting to the stricter checks and compliance requirements?
Pattens Group offers Australian businesses several resources and guidelines to adapt to the updated policies’ stricter compliance requirements for R&D Tax Incentive claims. Our expert advice and resources focus on helping companies self-assess their eligibility, improve documentation, and navigate audits effectively. We help Australian businesses better align their R&D activities with updated guidelines, maintain robust documentation practices, and confidently navigate compliance checks under the stricter framework introduced for 2025.
