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Software development sector guide for the R&D Tax Incentive
This guide has been developed to help you
self-assess the eligibility of your software-related activities for the R&D
Tax incentive program.
This guide was updated in May 2024 with minor changes that clarify when software activities excluded as core R&D activities might be eligible as supporting R&D activities.
About this guide
The Software-related activities and the R&D Tax Incentive (software guide) is aimed at businesses undertaking software-related R&D activities.
Its intent is to help you correctly self-assess the eligibility of your activities.
As with all our sector-specific guides, we recommend reading the Guide to Interpretation before reading this guide.
Hypothetical case studies
Hypothetical Machine Learning case study
Read a hypothetical case study on how you can self-assess and register your software R&D activities.
Hypothetical case study: Far Side – R&D in a new space
Read a hypothetical case study on how you can self-assess and register your software R&D activities.
DUG Technology customer story
DUG Technology
The Research and Development Tax Incentive has helped DUG Technology establish some of the biggest, most environmentally-friendly data centres in the world.
Moodle customer story
Moodle
Technology company Moodle used the Research and Development Tax Incentive to grow their business and further develop their online learning software.
intelliHR customer story
intelliHR
Technology company intelliHR used the Research and Development Tax Incentive to create an intuitive data and analytics software as a service product that streamlines human resources processes and empowers businesses and their employees.
Taxpayer alerts
The R&D Tax Incentive is administered by us and the Australian Taxation Office (ATO). We share information about registrations and claims to ensure program compliance.
We prepare taxpayer alerts to provide a summary of the concerns about new or emerging higher risk tax arrangements or issues. The following taxpayer alert is specific to the R&D Tax Incentive.
Following the Full Federal Court decision in Moreton Resources Limited v Innovation and Science Australia [2019] FCAFC 120, we have updated how we assess whether an activity was conducted for the purpose of generating new knowledge.
Therefore, the taxpayer alert should be read with the following information in mind:
- Activities involving the application of existing technology in a different context or location are capable of meeting the definition of ‘core R&D activities’. This will depend on the circumstances of the individual case, and whether all of the legislative requirements for ‘core R&D activities’ are met.
- Activities where the outcome could be known or determined in advance may still have been conducted for the purpose of generating new knowledge. However, activities need to meet both of these legislative requirements to be ‘core R&D activities’.
We have also updated our guidance on software-related activities. Software-related activities excluded from being core R&D activities because they have the dominant purpose of use for internal administration (including administration of business functions) may be able to be claimed as supporting R&D activities provided they meet the necessary requirements including a dominant purpose of supporting a core R&D activity.
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Read Taxpayer Alert – 2017/5A - Addendum.
Australian Taxation Office (ATO)