Offset your R&D costs to help innovate and grow your business
Overview of the R&D Tax IncentiveLast Updated: 03 December 2021
Overview of the R&D Tax Incentive
The Research and Development Tax Incentive (R&DTI) offers a tax offset for companies conducting eligible R&D activities. It encourages investment in R&D to help your company to grow and innovate which generates benefits for the Australian economy.
As well as providing financial support, the R&DTI can be an opportunity to collaborate with registered Research Service Providers (RSPs).
What do you get?
Tax-offset for eligible R&D activities.
Who is this for?
Eligible companies conducting eligible R&D activities.
R&D Tax Incentive at a glance
New tax offset benefits for eligible R&D conducted from 1 July 2021
The tax offset for eligible R&D conducted from 1 July 2021 is now based on a premium on top of your corporate tax rate.
Turnover of less than $20 million
For R&D entities with aggregated turnover of less than $20 million, the refundable R&D tax offset is your corporate tax rate plus an 18.5% premium.
Turnover of $20 million or more
For R&D entities with aggregated turnover of $20 million or more, the non-refundable R&D tax offset is your corporate tax rate plus an incremental premium.
The premium increments are based on your R&D Intensity. This is a percentage of your eligible R&D expenditure as proportion of your total expenditure for the year.
- All eligible R&D expenditure up to 2% R&D Intensity will receive a non-refundable R&D tax offset equal to your corporate tax rate plus 8.5% premium.
- Additional eligible R&D expenditure above 2% R&D Intensity will receive a non-refundable R&D tax offset of your corporate tax rate plus 16.5% premium.
Tax offset benefits for eligible R&D conducted up to 30 June 2021
If you are claiming eligible R&D conducted up to 30 June 2021, the previous tax offset rates apply.
Depending on your company's annual turnover, the R&DTI provides either a refundable or non-refundable tax offset.
- 43.5% refundable tax offset is available to companies with an annual turnover of less than $20 million.
- 38.5% non-refundable tax offset is available to companies with an annual turnover is more than $20 million.
Understanding eligible R&D Activities
The difference between a R&D project and a R&D activity
R&D projects are made up of a number of steps that you must take for a project to succeed. These steps are R&D activities. Each R&D activity will have of one or more actions that you must complete to achieve an activity outcome.
The program supports R&D activities that can be shown to follow a set of specific actions. These actions must meet the requirements set out in the definition of an eligible R&D activity.
The definition of an eligible R&D activity under the R&DTI
Eligible R&D activities are defined in the legislation that underpins the program. The Income Tax Assessment Act 1997 identifies eligible activities as either core R&D activities or supporting R&D activities.
How does it work
The R&DTI is a self-assessment program
Before you register for the R&DTI:
- You must self-assess whether your entity is eligible.
- You must self-assess if your R&D activities are eligible.
- You must self-assess that your R&D expenditure is eligible.
- You must keep records and evidence to support your registration and claim.
To help ensure your eligibility you should read the legislation. You should also review supporting information available here including the Guide to Interpretation.
Joint administration
The R&DTI is jointly administered by:
- AusIndustry on behalf of Industry, Innovation and Science Australia
- the Australian Tax Office (ATO).
You need to register your R&D activities with AusIndustry then claim your tax offset through your annual tax return with the ATO.
Steps you need to follow
Applying for the R&DTI is an annual process. Each year, you should review the following steps as part of your application process. These steps help to ensure you and your R&D activities are eligible.
Step 1: Self-assess your eligibility while planning your R&D
Step 2: Consider applying for an Overseas Finding or Advance Finding
Step 3: Conduct R&D, continue to self-assess and keep records
Step 4: Register for the program
Step 5: Claim your tax offset
Important considerations
While we can support you as you apply, it's your responsibility to ensure your application and claim meet the program requirements.
You may consider consulting an R&D tax adviser or tax agent to prepare your application for registration and later claim. However, this does not guarantee your eligibility.
Learn more
How to apply
To apply, you'll need to use our customer portal. This requires you to link your myGovID to your company ABN to get access.
You may consider doing this while you review the R&D Tax Incentive guidance here. We have provided information to help you with this process.
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