Australia / Guides / How does Australia's R&D Tax Incentive actually work?
Australia · guideHow does Australia's R&D Tax Incentive actually work?
The short answer
Australia's R&D Tax Incentive (R&DTI) offsets part of the cost of eligible research and development through the company tax return, not through a cash grant paid up front. A company with aggregated turnover under $20 million gets a refundable offset equal to its corporate tax rate plus an 18.5% premium — 43.5% for a base-rate entity on 25% company tax — meaning it can produce a cash refund even in a loss year. A company at $20 million or more turnover gets a non-refundable offset instead, tiered by R&D intensity. Getting the offset requires two separate steps with two separate administrators: registering the year's eligible R&D activities with AusIndustry within 10 months of the end of the income year — a strict deadline with no discretion to extend — and then claiming the offset on the company tax return, which is a tax agent service only a Tax Practitioners Board (TPB)-registered tax agent can lawfully prepare and lodge for a fee.
Key facts — verified dates on each
What the offset is actually worth
The R&DTI is not a flat percentage handed out for doing R&D — the rate depends on the company's aggregated turnover for the year, and it splits into two structurally different regimes at the $20 million line. Under $20 million aggregated turnover, a base-rate entity gets a refundable offset of 43.5%: its 25% company tax rate plus an 18.5% premium. Refundable means the offset can generate an actual cash refund even for a company that isn't yet profitable, which is what makes the programme genuinely useful for an early-stage business still burning cash on R&D.
At $20 million or more aggregated turnover, the offset switches to non-refundable and becomes intensity-tiered: the company's tax rate plus an 8.5% premium on R&D expenditure up to 2% of total company expenditure (R&D intensity), and tax rate plus a 16.5% premium on the portion of R&D spend above that 2% intensity threshold. A larger company can't simply add a flat premium to its whole R&D bill — the calculation runs in two bands, and getting the split wrong is a common source of an overstated claim.
Two gates, two different administrators
The R&DTI is jointly run by the Department of Industry, Science and Resources (through AusIndustry) and the Australian Taxation Office, and each has a distinct job. AusIndustry registers the company's R&D activities for the year — the core experimental work and any directly related supporting activities — through the R&DTI customer portal. Registration is what confirms the department accepted the application; it is not a finding that the activities are eligible, and both AusIndustry and the ATO can review the underlying self-assessment later, at registration or afterwards.
Only once a year's activities are registered can the offset itself be claimed, by lodging the R&D Tax Incentive schedule with the company's income tax return and quoting the registration number AusIndustry issued. That claim — deciding the rate, applying it to the right expenditure, and lodging the schedule with the ATO — is a tax agent service under the Tax Agent Services Act 2009, and preparing or lodging it for a fee without being registered with the TPB is a contravention of a civil penalty provision. The registration step and the claim step sit on different sides of that licensing line.
The deadline that does not move
R&D activities have to be registered with AusIndustry within 10 months of the end of the income year in which the work was conducted — 30 April 2027 for a standard FY2025–26 year. Unlike most tax deadlines, this one carries no discretion to extend for genuinely eligible spend that simply missed the window; a company that conducted real, eligible R&D but registers on 1 May has no offset to claim for that year, full stop. Because the registration and claim are two separate steps, the 10-month registration clock has to be tracked on its own calendar, independent of when the company tax return itself is due.
Eligibility rests on records kept while the work happened, not reconstructed afterward
To register, a company has to be an eligible R&D entity — broadly, a corporation incorporated under Australian law, or a foreign-incorporated company that is an Australian tax resident or has a permanent establishment here under a double tax agreement — and the work registered has to meet the legislated definitions. A core R&D activity is experimental work carried out to generate new knowledge, where the outcome can't be known in advance and can only be worked out through a systematic progression: hypothesis, experiment, observation, evaluation, conclusion. Supporting activities are work directly related to a core activity, and they have to be identified and registered separately, not folded into the core activity's description.
A company generally needs at least $20,000 of eligible R&D spend in the income year to register — a floor that doesn't apply where the expenditure is on a registered research service provider or a Cooperative Research Centres Program contribution. Any R&D expenditure incurred outside Australia needs a separate overseas finding before it can be claimed at all. Underneath all of this sits a record-keeping obligation that runs the whole year, not just at claim time: because the programme is self-assessed, the evidence that the systematic-progression work actually happened, and that each supporting activity genuinely relates to a core one, has to exist contemporaneously — built while the R&D is being done, not written up months later when a registration deadline is close.
The figures, and when we checked them
These numbers change by year or by notification. Each one shows the date we last verified it against the source — if that date looks old, check the source before relying on it.
Questions on this
Is the R&D Tax Incentive a grant?
No. It's a self-assessed tax offset claimed through the company income tax return, not a cash grant paid up front. Companies under $20 million turnover get a refundable offset, which can still produce a cash refund even without taxable profit — but the mechanism is a tax offset, not a grant disbursement.
How much is the offset actually worth?
For a company with aggregated turnover under $20 million, 43.5% — the 25% base-rate company tax rate plus an 18.5% premium, and refundable. For turnover of $20 million or more, the offset is non-refundable: tax rate plus 8.5% on R&D spend up to 2% of total expenditure (R&D intensity), and tax rate plus 16.5% on the portion above that.
Who administers the programme?
Two bodies, with two different jobs. AusIndustry, part of the Department of Industry, Science and Resources, registers the R&D activities each year. The ATO processes the tax offset claim, lodged as a schedule attached to the company tax return, once registration is confirmed.
When do we need to register our R&D activities?
Within 10 months of the end of the income year the work was conducted in — 30 April 2027 for a standard FY2025–26 year. This deadline has no discretion to extend, even for spend that is genuinely eligible; missing it means no offset for that year.
Does registering guarantee the offset will be accepted?
No. The programme runs on self-assessment — the company decides what it registers, and registration confirms AusIndustry accepted the application, not that the activities are eligible. Both AusIndustry and the ATO can review the self-assessment later, at registration or afterwards.
What counts as a core R&D activity versus a supporting one?
A core activity is experimental work to generate new knowledge, where the outcome can't be known in advance and can only be determined through a systematic progression — hypothesis, experiment, observation, evaluation, conclusion. Supporting activities are directly related to a core activity but don't meet that definition on their own, and the two have to be registered separately.
Is there a minimum R&D spend required to claim?
Generally $20,000 in the income year. That floor is waived if the expenditure is on a registered research service provider or a Cooperative Research Centres Program contribution.
Can R&D done outside Australia be claimed?
Only with a separate overseas finding covering that expenditure, applied for before it can be included in a claim — it is not automatically eligible just because the rest of the company's R&D is registered.
Who can actually lodge the R&D offset claim on the company tax return?
Preparing and lodging the R&D Tax Incentive schedule on a company's tax return for a fee is a tax agent service under the Tax Agent Services Act 2009 — only a Tax Practitioners Board-registered tax agent can lawfully do it. Unregistered preparation or lodgment for a fee is a contravention of a civil penalty provision.
Is the AusIndustry registration step also restricted to a registered tax agent?
No. Preparing and lodging the AusIndustry registration itself — the paperwork identifying and describing the core and supporting activities — is not stated as a TPB-gated task. The gate sits on the tax-offset claim made afterward in the company tax return, not on the registration step.
What records do we need to keep to support a claim?
Contemporaneous evidence that the R&D activities actually happened as described: the systematic progression followed for each core activity, and a clear explanation of how each supporting activity relates to its core activity. Because the programme is self-assessed, this record-keeping has to run through the year the work is done, not get reconstructed close to the registration deadline.
Does CapEasy claim the R&D offset or advise on eligibility?
No. CapEasy prepares and coordinates the AusIndustry registration — organising the activity descriptions and the supporting substantiation file — but does not advise on eligibility or claim the offset. Determining eligibility and lodging the R&D schedule inside the company tax return is your registered tax agent's role, under their TPB registration.
Primary sources
- business.gov.au — Research and Development Tax Incentive programme page
- Australian Taxation Office — Company tax rates (base-rate entity 25% / 30%)
- Tax Practitioners Board — Tax agent registration
- R&D Tax Incentive customer portal (AusIndustry registration channel)
Last reviewed 2026-08-16. Statutes and schedules change — the sources above are authoritative, this page is orientation.
Want this handled rather than read about?
A scoping call decides what fits. We are a consulting firm — lodgments and agent work run through registered BAS and tax agents. Whoever signs and files stays yours.