The claim process is a multi-step cycle coordinated between DISR (AusIndustry) for technical eligibility and the ATO for financial claims.
The process involves coordination between two major government bodies: the Department of Industry, Science and Resources (DISR), through AusIndustry, for technical eligibility (activity registration) and the Australian Taxation Office for financial eligibility (expenditure claims and benefit payment). The claim process occurs annually and generally begins after the financial year has ended.
1) Initial Assessment and Planning (Pre-Submission)
This phase requires the company to determine whether it satisfies the fundamental eligibility criteria for the R&DTI, which is a core obligation under the self-assessment framework.
1-2 weeks
√ Self-Assessment of Eligibility: Confirm you are an eligible R&D entity, typically an incorporated Australian corporation.
√ Technical Activity Assessment: Assess eligibility of R&D activities with uncertain outcomes requiring systematic progression
√ Financial Assessment: Confirm eligible expenditure will be at least $20,000 for the income year
√ Documentation Establishment: Put internal systems in place to record activities and expenditure contemporaneously
√ Advance Findings (Optional): Apply for assurance before registering or for overseas R&D expenditure before the end of the financial year end for the year you are planning to submit a claim
2) Activity Registration (AusIndustry/DISR)
This phase involves the company assessing whether it meets the fundamental eligibility requirements for the R&DTI, which is a key responsibility within the self-assessment framework.
Deadline: 10 months after year-end
√ Lodge Application for Registration: Apply via the R&DTI customer portal for every income year
√ For companies with FY ending on 30 June: deadline is 30 April of the following year
√ For companies with FY ending on 31 December: deadline is 31 October of the following year
√ Internal Review by AusIndustry: Activities assessed for eligibility risk
√ Unique Registration Number: Receive unique registration number upon completion
3) Financial Claim and Submission (ATO)
Once activities are registered and the registration number is obtained, the company proceeds with the financial claim through its annual tax return, which is administered by the ATO.
3-4 weeks
√ Prepare R&D Tax Incentive Schedule: Calculate total notional R&D deductions
√ Exclude ineligible costs: Includes the interest, core technology expenditure, not-at-risk amounts
√ Apply feedstock adjustment: where applicable
√ Lodge Tax Return & Schedule: Include R&D schedule with registration number in company tax return
4) Benefit Realisation and Review
This final stage involves the ATO processing the claim and disbursing the benefit, followed by potential retrospective compliance checks.
6-12 weeks
√ R&D tax offset: Applied to company’s tax liability
√ Refundable offset: Cash refund if in a loss position (6-8 weeks)
√ Non-refundable offset: Tax liability is lowered immediately
√ Compliance/Audit: Subject to retrospective review by ATO and DISR for up to 5 year
Eligible R&D Activities
Understanding the two types of activities that qualify for the incentive
Core R&D Activities
Experimental activities conducted for generating new knowledge
- Activities that create new or improved materials, products, processes, devices, or services
- Outcome cannot be known or determined in advance based on current knowledge
- Requires systematic progression of work to resolve scientific or technological uncertainty
- The fundamental driver of the R&D Tax Incentive
Supporting R&D Activities
Activities conducted for the dominant purpose of supporting core R&D
- Must have the dominant purpose of supporting core R&D activities
- Would not have been undertaken for normal operational reasons alone
- Only qualify when directly linked to eligible core activities
- Generally not subsidised as standalone activities
Eligible Expenditure
The R&D tax offset is claimed on notional deductions for these types of eligible expenditure
Salaries & Wages
Costs for employees directly involved in R&D activities
Goods & Services
Purchasing materials and services for R&D projects
Contractor Costs
External contractors engaged for R&D work
Depreciating Assets
Decline in value of assets used for eligible R&D
Balancing Adjustments
A balancing adjustment for depreciating assets used for R&D activities
Other Expenses
Certain administrative costs related to R&D activities, including rent and utilities for R&D facilities
Important Notes
- Expenditure incurred to an associate is only deductible when it is actually paid (i.e. associate-party payments must be paid, not merely incurred, to be claimed as notional deductions).
- A feedstock adjustment applies where R&D activities produce marketable goods, reducing the total R&D benefit based on the value of those direct outputs.
- Claims are generally not subject to an overall expenditure cap, however:
- The premium (refundable or non-refundable) component of the R&DTI applies only to notional R&D deductions up to $150 million per income year. Amounts above $150 million attract the company tax rate only.
Ready to explore how we can help support your business growth?
Contact Pattens Group today for a complimentary consultation. With the right strategy and our expertise, you may maximise your benefits from the R&D Tax Incentive.