Frequently Asked Questions

What is the R&D Tax Incentive?

The Australian Federal Government’s R&D Tax Incentive Program is a self-assessment program that offers generous tax offsets to companies undertaking R&D activities in Australia. In addition, pre-approved Overseas R&D activities (and associated expenditure) are also eligible.

How can I apply for the R&D Tax Incentive?

There are two main aspects to applying for the tax benefits offered by the R&D Tax Incentive.

  1. An eligible company must prepare and submit an application via a registration to AusIndustry (on behalf of Industry, Innovation and Science Australia). This application contains information on the eligible R&D activities being undertaken by the claimant company.

  2. The company must also prepare an R&D Tax Incentive Schedule, which is submitted with the company’s tax return to the Australian Tax Office (ATO). The Schedule contains the eligible expenditure identified as being directly related to the R&D activities undertaken in that financial year.

How much can I receive?

For companies with an aggregated turnover of less than $20M in the relevant financial year, the benefit is a 43.5% refundable tax offset.

For companies with an aggregated turnover of more than $20M, the benefit is a 38.5% non-refundable tax offset.

R&D Tax Credit, R&D Tax offset, R&D Tax rebate, what’s the difference?

These all relate to R&D Tax programs in various jurisdictions. The USA has a R&D Tax Credit system.

Australia’s program is officially termed the R&D Tax Incentive program. Through this, eligible companies can claim tax offsets, that are sometimes referred to as tax rebates and tax credits.

When can I claim the R&D Tax Incentive?

Eligible companies can claim the tax benefit annually from 1 July – following the ending of the Australian financial year (viz., 30 June).

The AusIndustry application must be lodged within 10 months of the financial year ending. This is usually 30 April of the following year.

However, for many start-up companies that are in tax losses, it benefits that company to submit their claim as soon as possible. This has a significant impact on the company’s cash flow, and in turn, the R&D activities and company growth.

What companies qualify for the R&D Tax Incentive?

In order for a company to claim the R&D Tax Incentive, that company must be a body corporate registered in Australia, or be a permanent establishment of an Overseas company registered in Australia (where Double Tax Agreements are in place between the two countries).

These include companies in the following broad industry sectors:

  • Engineering
  • Information and Communications Technology (ICT)
  • Life Sciences
  • Manufacturing
  • Mining

What benefits do R&D Tax advisors provide?

R&D Tax advisors that are registered with the Australian Tax Practitioners Board (TPB) are recognised practitioners, and are bound by the code of conduct of the Board.

The benefits of using a R&D Tax advisor include:

  • Deep knowledge of the essential elements of the program.
  • Ability to articulate the technical descriptions of the experimental activities for the AusIndustry application.
  • Knowledge in preparing and collating the evidence and documentation required to support and substantiate the R&D Tax claim.
  • Expertise in calculating and reporting the eligible expenditure directly related to the R&D activities, including applying the appropriate apportionment methodologies.
  • Knowledge in collating the relevant documents to support the R&D Tax claim and to substantiate the inclusion of expenditure items.
  • Experience in defending R&D Tax claims being reviewed by either the ATO or AusIndustry.
  • Having direct contact with both the ATO and AusIndustry – via quarterly reference group meetings.

Can I apply for more than one government grant?

An eligible company can apply for more than one government grant.

The R&D Tax Incentive program is NOT a grant, but a self-assessment program to access the R&D Tax benefits. This means that a company ‘self assesses’ and lodges their R&D Tax claim. The company may be called upon (by the ATO and/or AusIndustry) to provide evidence to substantiate the claim. Claims are typically eligible for reviews/audits for 4 years following the initial lodgement.

What happens if the R&D Tax claim is delayed?

Companies MUST prepare and lodge their R&D Tax Incentive application registrations with AusIndustry within 10 months after the financial year ends. There is no extensions available, except in .

If either regulatory agency (the ATO or AusIndustry) delays in processing a R&D Tax claim:

  • A claimant or their R&D Tax advisors can contact AusIndustry after 10 working days following lodgement to enquire about the status of the application. Delays are often caused by errors in the application, or during periods of high-volume lodgements (not surprisingly, during April).
  • The claimant’s accountant can contact the ATO after 30 working days following lodgement of the company’s tax return. Again, delays may be caused by incorrect information in the R&D Tax Schedule. Often, the ATO can withhold payment of refunds while reviewing the claim, or requesting information to confirm expenditure eligibility.

What happens if the R&D Tax claim is not paid?

Typically, when a R&D Tax claim is not paid, it is due to the ATO withholding the refunds. This may be due to a claim being disallowed following a finding by either the ATO or AusIndustry that deems the activities and/or the expenditure not being eligible.

There are various strategies to address this, spanning discussions with the relevant regulator, to pursing the matter through the courts.

What businesses qualify for the R&D Tax Incentive?

Generally, technology-based companies may qualify for the R&D Tax Incentive:

  • Engineering
  • Information and Communications Technology (ICT)
  • Life Sciences
  • Manufacturing
  • Mining