Funding innovation is key for Australian businesses. R&D Tax Incentive plays a crucial role in making that happen.
Applications for the FY24-25 cycle open today, 1 July 2025, covering eligible R&D activities conducted from 1 July 2024 to 30 June 2025. This offers significant financial support for your projects.
Many businesses think R&D claims are only for large companies or “high-tech” industries. This program can help businesses of all sizes and across many sectors. The R&D Tax Incentive supports a wide range of activities, turning your innovative work into tangible financial benefits.
What the New FY24-25 Application Cycle Means for You
This new financial year gives you a clear opportunity. All your R&D expenses from 1 July 2024 to 30 June 2025 count toward your FY24-25 R&D tax incentive claim. This is your chance to gather the documentation for the R&D activities already completed. It’s now time to think about how to register your R&D activities from the previous year with the incentive in mind.
Understanding what qualifies and having documented it from the beginning continually streamlines your current claim. This also reduces end-of-year stress and builds a stronger application.
Understanding What Counts as R&D
Knowing what qualifies as R&D is a crucial first step. It is not about lab coat scientific breakthroughs. It’s about systematic experimentation to resolve technical uncertainty and generate new knowledge.
- Core R&D Activities: These are activities that are experimental in nature and whose outcome cannot be known in advance. They use established scientific principles and aim to generate new knowledge. You must have formed a hypothesis, conducted experiments, observed results, and drawn conclusions. Technical uncertainty is vital here. You were trying to find out if something could be done or how to do it when the answer wasn’t clear or publicly available.
- Supporting R&D Activities: These activities directly relate to core R&D activities. They are necessary to support the core R&D. This can include background research, literature reviews, developing prototypes, testing new materials, or analysing results.
R&D Happens in Many Places
R&D is not just for labs. It can take place in various business settings.
Consider these examples:
- A biotech firm is developing a novel enzyme formulation to improve the yield and purity of a fermentation process, aiming to achieve the same product quality while reducing production time.
- An engineering consultancy is trialling innovative composite materials in bridge construction to enhance structural strength and longevity while reducing overall weight.
- A manufacturing business is experimenting with advanced automation algorithms on its assembly line to minimise material waste and increase throughput without compromising product specifications.
These are all examples of activities that could contain eligible R&D.
Important Update: Exclusions for the Current Fiscal Year (FY25-26)
For income years starting on or after
With effect from income years that will commence on or after 1 July 2025, R&D activities in which gambling and tobacco are involved will no longer be eligible for the R&D Tax Incentive. This amendment is in line with public funding and the values of society at large. If your business is involved in these sectors, you should revisit your R&D strategy beginning now.
Why Documenting Early Matters
The Australian Taxation Office (ATO) and the Department of Industry, Science and Resources (DISR) are closely examining R&D claims. This means strong and “contemporaneous” documentation is critical.
“Contemporaneous” means you created more records as the R&D activity happens, not weeks or months later. This proves you undertook an experimental process to resolve technical unknowns.
What should you have documented from 1 July 2024?
- Project Plans: Clearly outlining objectives, formulating hypotheses, and designing experiments accordingly.
- Experiment Logs: Detailed records of tests, trials, and iterations, comprising dates, employees, and the methods used.
- Results and Analysis: Provide a report on the observations, data gathered, and outcomes that were drawn. Mention any unexpected results obtained or failures experienced during FY24-25.
- Technical Challenges: Recording technical uncertainties that were encountered and also explain how your R&D team tried to deal with them.
- Meeting Minutes: Keep records of discussions about R&D projects.
- Financial Records: Include timesheets for staff involved in R&D and invoices for materials, equipment, and contractors.
Who Can Claim R&D Tax Incentive?
The incentive is open to Australian companies conducting eligible R&D activities in Australia. Generally, you need to spend at least $20,000 on eligible R&D. This threshold does not apply if you have engaged a Registered Research Service Provider.
The Financial Benefits
The R&D Tax Incentive offers different financial benefits based on your company’s turnover.
- For companies with a turnover of less than $20 million: The incentive often provides a refundable tax offset. This means you could receive a cash refund. This is a significant benefit for small and medium businesses. For example, a small firm spending $100,000 on R&D could get $43,500 back.
- For companies with a turnover of $20 million or more: The incentive provides a non-refundable tax offset. This reduces your income tax payable. Larger companies save big on taxes.
This cashback or tax saving can fuel your growth. Use it to hire more staff, launch products, or expand into new markets. It can also boost your reputation, attracting talent and investors.
Take a Sydney startup, for instance. They used a $50,000 refund to hire two coders, launching their climate tech app six months early. Atlassian claimed $200 million in 2021-22 to go global. That’s the power of R&D incentive.
Important Administrative Update: New Application Form Coming Mid-August 2025
While the FY25-26 cycle begins today, be aware of an upcoming administrative change. The Department of Industry, Science, and Resources (DISR) is launching a new R&D Tax Incentive registration application form in mid-August 2025.
This update aims to streamline the application process and align it more closely with legislative requirements. The new form is expected to feature:
- Improved Questions: Better structured questions and ordering to match legislative definitions of R&D.
- Greater Focus on Documentation: Likely more specific prompts for the type of evidence required to support your R&D activities.
- Enhanced Usability: Potentially increased character limits for detailed answers, more drop-down menus, and pre-filled fields to simplify data entry.
- Transition from Free-Text: Some free-text fields may transition to structured input types, reducing ambiguity.
What this means for you: If you plan to start drafting an application early to claim your R&D expenses during the year 2024-2025, know that any saved drafts in the current DISR portal may be deleted when the new form goes live. This reminds you that even administrative changes need attention. It ensures you don’t lose progress or face rework. This new form aims to make it easier for applicants to assess if their R&D activities qualify and should lead to fewer follow-up queries from DISR.
The 10-Month Deadline and Why Starting Now Is Smart
For businesses with a standard 30 June year-end, the deadline to register your FY24-25 R&D activities with DISR is 30 April 2026. YES, this seems far off; having documented throughout the year simplifies the process immensely. Trying to reconstruct records later is much harder and increases compliance risk.
How to Claim R&D Tax Incentive FY24-25
Ready to make your claim? Here’s what you need to do:
- Register: Sign up your R&D activities with DISR by 30 April 2026 for FY24-25. Start compiling your documentation now and get into the registration process to claim your R&D expenses for FY24-25.
- Document: Ensure you have tracked every dollar during that period. This includes wages, software, and contractors. Verify experiment logs to prove they were new.
- Lodge: Include your claim in your tax return.
Pattens Group: Your Partner in Innovation
You are busy innovating, solving problems, and growing your business. The R&D Tax Incentive has detailed eligibility criteria and strict documentation rules. This is where expert guidance helps.
We specialise in helping Australian businesses understand the R&D Tax Incentive. Our experience spans various industries. This allows us to identify eligible activities you might miss. We ensure your claims are compliant and maximised. We manage the paperwork so that you can focus on your core business.
Our services include:
- Eligibility assessments for your specific projects
- Guidance on creating strong, contemporaneous documentation systems.
- Expert preparation and submission of your R&D Tax Incentive application.
- Support during any ATO or DISR reviews or audits.
One client, a fintech startup, got $75,000 back last year. They used it to expand into India.
Act Now for FY24-25 to Claim the R&D Tax Incentive
The registration process for eligible R&D expenses during FY24-25 has just begun. If you made or tried to make some innovations during this period, this is your chance to turn those innovative efforts into tangible financial benefits. Do not let misconceptions or complexity stop you. If you are new and unsure about R&D tax incentives and how they work, contact us today for a discussion to claim FY24-25 R&D activities. Let us help ensure your innovation gets the government support it deserves. Give us a call, and let’s make your innovation pay off!
Frequently Asked Questions (FAQs)
What specific documentation formats or templates are recommended for maintaining contemporaneous records?
To have contemporaneous records, it would be a good idea to use structured templates for project plans that contain objectives and hypotheses. You could use a digital format to log your experiments with complete details of dates, personnel, and methodologies followed. Also, consider maintaining a separate note for results and analysis; in this case, it also indicates unexpected outcomes. Remember to document all the technical uncertainties mentioned. Meeting notes are essential, along with the financial records listing staff timesheets and invoices for materials and contractors.
How will the removal of eligible R&D activities related to gambling and tobacco impact current projects in these sectors?
The removal of R&D eligibility for gambling and tobacco activities, starting from 1 July 2025, indicates that the new or ongoing projects in these sectors will not be considered eligible for the R&D Tax Incentive. Aussie businesses functioning in these sectors must immediately check their R&D pipeline and adjust funding strategies. This new amendment in R&D is a reflection of the larger policy shift in the government funding strategy.
Are there any additional resources or support available for businesses new to the R&D Tax Incentive claiming process?
Undoubtedly, there are various resources available for businesses that are planning to claim the R&D tax incentive for the very first time. Government websites such as business.gov.au and ato.gov.au are the best platforms to find guidelines and get information. Furthermore, we are R&D consultants offering services ranging from eligibility assessments, documentation guidance, application preparation, and lodgement. Moreover, we assist in maintaining compliance in ATO or DISR reviews, which can be beneficial for first-time claimants.
