The R&D Tax Incentive programme provides tax offsets for expenditure on eligible R&D activities. The programme is open to eligible companies of all sizes in all industry sectors.
What is the offset?
The programme has two core components based on company turnover. Companies with eligible R&D expenditure may be eligible for either a refundable or non-refundable tax offset.
For income years from 1 July 2016:
- a 43.5% refundable tax offset is available for eligible companies with an aggregated annual turnover of less than $20 million per year, provided they are not controlled by income tax exempt entities.
- a 38.5% non-refundable tax offset is available for all other eligible companies. Unused offset amounts may be carried forward to future income years.
For income years before 1 July 2016, the refundable tax offset is 45% and the non-refundable tax offset is 40%.
For companies whose eligible expenditure exceeds $100 million for an income year, the tax offset for amounts claimed above $100 million is reduced to the company tax rate.
Examples of how the offset works?
Simplified worked examples are available to show how the R&D tax offset rates apply in practice to companies registering and claiming R&D activities through the R&D Tax Incentive. The examples provide eight simplified scenarios that show how the amount of the R&D tax offset might be determined from specific amounts of expenditure. Simplified scenarios are included for companies with aggregated turnovers of:
- less than $20 million and
- $20 million and above.
The examples also show companies in these turnover groups that are in profit and others where they are in tax loss.
Note: As they are simplified, these examples cannot fully reflect the tax circumstances of any individual company. Companies may wish to seek their own independent advice about the offset amount they may be entitled to.
Download the R&D Tax Incentive - simplified worked examples.
How to claim the tax offset?
To claim the tax offset:
- Self-assess your eligibility for the R&D Tax Incentive.
- Make sure you keep records as evidence of your eligibility.
- Apply to register your R&D activities with the department.
- Claim the offset through your company’s income tax return.
Claiming the tax offset in your company income tax return
Once your application to register your activities is accepted, you will receive a registration number in writing for you to include in your company’s income tax return.
When you lodge your income tax return with the ATO you complete an R&D Tax Incentive Schedule. The Schedule must include the company’s registration number for the relevant year.
Generally, a refundable tax offset is applied after all other tax offsets. If there is an excess of tax offset, and your company’s aggregated turnover is less than $20 million, then you may receive a refund.
In the case of a non-refundable tax offset, your company can carry it forward to a later year subject to ATO taxation rules.
The ATO has more information about how you can claim the R&D refundable or non-refundable tax offset.
It is important to understand that the registration letter you receive containing your registration number is not a determination that you are eligible for the R&D Tax Incentive by the department. The registration of your R&D activities does not, by itself, determine that the activities described in the registration are eligible core or supporting R&D activities. It is also not an indication that you are meeting the legislative requirements of the R&D Tax Incentive.
Advance and Overseas Findings
For companies that would like to confirm their eligibility for the R&D Tax Incentive before registering their activities, an Advance Finding option is available.
For companies wishing to claim R&D expenditure on R&D activities to be undertaken overseas, an Overseas Finding is required.