The research and development (R&D) tax incentive encourages companies to engage in R&D benefiting Australia, by providing a tax offset for eligible R&D activities. 

Purpose of the R&D tax incentive 

The R&D tax incentive aims to boost competitiveness and improve productivity across the Australian economy by: 

• encouraging industry to conduct R&D that may not otherwise have been conducted 

• improving the incentive for smaller firms to undertake R&D 

• providing business with more predictable, less complex support 

Administration and registration departments 

The ATO and the Department of Industry, Innovation and Science (on behalf of Innovation and Science Australia) jointly administer the R&D tax incentive. Your R&D activities must be registered with the Department of Industry, Innovation and Science before the tax offset is claimed, and we determine if the expenditure claimed in your tax return for your R&D activities is eligible for the tax offset. 

Core components 

• whether or not your entity is eligible to register R&D activities and claim R&D tax offsets in any given year 

• a refundable tax offset for certain eligible entities whose aggregated turnover is less than $20 million 

• a non-refundable tax offset for all other eligible entities 

• you have incurred notional deductions of at least $20,000 on eligible R&D activities 

Tax offset for entities engaged in R&D 

• a 43.5% refundable tax offset for eligible entities with an aggregated turnover of less than $20 million per annum, provided they are not controlled by income tax exempt entities; 

• a 38.5% non-refundable tax offset for all other eligible entities (entities may be able to carry forward unused offset amounts to future income years).

R&D Tax Incentive Full Article