R&D Tax Incentive
At a glance
Provides a tax offset for some of a company's cost of doing eligible research and development (R&D) activities by reducing a company's income tax liability. Tax offsets of 43.5% or 38.5% are available for costs incurred on eligible activities depending on a company’s annual aggregated turnover. The 43.5% benefit is a refundable offset.
Who can apply:
At a minimum, applicants must:
- be an incorporated company
- be conducting eligible core R&D activities. These are defined in the legislation as being experiments that are guided by hypotheses and conducted for the purpose of generating new knowledge
- have incurred eligible R&D expenditure or notional deductions of at least $20,000 (unless using a Research Service Provider or a Cooperative Research Centre).
This is a self-assessment programme. Further key eligibility requirements apply.
Federal Budget 2018-19
On 8 May 2018, the Treasurer, the Hon Scott Morrison MP, announced changes to the R&D Tax Incentive, as part of the Federal Budget 2018-19.
Further information about the changes is available on budget.gov.au.
The changes respond to the findings of the 2016 Review of the R&D Tax Incentive. The Review found that the cost of the incentive has grown significantly and questioned how well it was meeting its objectives.
The Government is reforming the R&D Tax Incentive to reward additional investment in R&D while also ensuring the integrity and affordability of the R&DTI.
The changes will affect companies accessing the R&D Tax Incentive with income years commencing on or after 1 July 2018.
The Government is currently preparing draft legislation to implement the reforms to the R&D Tax Incentive announced in the Budget 2018-19, and will seek stakeholder feedback on the draft before it is introduced to Parliament.
Further information will be provided on the timing of the release of the draft legislation on business.gov.au.
To keep up-to-date with information on the R&D Tax Incentive program, you can subscribe to the R&D Tax Incentive Information Bulletin.
What is the R&D Tax Incentive?
The R&D Tax Incentive provides a tax benefit to companies to help offset some of the cost of conducting eligible research and development activities.
The R&D Tax Incentive is a self-assessment programme. This means that you are responsible for assessing whether your company and the R&D you are conducting meet the eligibility requirements of the programme. These requirements are determined by legislation.
To apply for the R&D Tax Incentive, you will need to register your eligible R&D with the Department of Industry, Innovation and Science (the department).
You are also responsible for keeping all records and documentation to demonstrate your R&D is eligible as defined in the legislation.
The department (on behalf of Innovation and Science Australia) jointly manages the R&D Tax Incentive with the Australian Taxation Office (ATO). The department manages the registration of R&D activities, and the ATO manages the rules on eligible entities and costs.
To be eligible for the R&D Tax Incentive you must:
- be a company that is liable to pay income tax in Australia.
- conduct at least one activity that meets the legislated definition of a core R&D activity.
- Core R&D activities involve at least one hypothesis guided experiment that is undertaken to generate new knowledge.
- Other non-experimental activities that directly support a core R&D activity may be eligible as supporting R&D activities.
You may claim for some R&D conducted overseas under certain circumstances.
Find out more about the eligibility requirements for the R&D Tax Incentive.
The department may conduct checks that registered activities comply with the law after you have registered. Similarly, the ATO may check if the R&D costs being claimed are eligible after registration.
When can I register for the R&D Tax Incentive?
The deadline for lodging an application to register your eligible R&D is 10 months after the end of your company's income year. This means:
- a company with a standard income period of 1 July 2016 to 30 June 2017 must lodge its registration application with the department by 30 April 2018.
- a company with a non-standard income period of 1 January 2017 to 31 December 2017, must lodge its registration application with the department by 31 October 2018.
After the deadline, an extension of time to register a late application may only be granted if the reason for an extension was not the fault of the company (or it's agents and advisors) and not within its control. A company must submit a written request for an extension of time to submit a late application.
You must lodge an application for registration for each year in which your company wishes to claim the R&D Tax Incentive.
Apply to register your R&D through the application form.
Register for the latest updates
Subscribe to the Information Bulletin for the latest updates on the programme.