About R&D Tax Incentives
Most democratic nations have some form of a research and development program designed to incentivise businesses to invest in future technologies and innovations. Governments offer these incentives because new technologies create jobs, stimulate the economy, and drive national productivity. In Australia, this initiative is called the R&D Tax Incentive (RDTI), which provides businesses with financial support in the form of a tax credit or tax offset through the tax system. This program encourages companies to invest in research and development, helping them bring new ideas to market while fostering economic growth and technological advancement.
The R&D Tax Incentive is jointly administered by AusIndustry, part of the Department of Industry, Science and Resources, and the Australian Taxation Office (ATO). AusIndustry oversees the registration of R&D activities, ensuring that the activities undertaken contribute to new knowledge and meet eligibility criteria. The ATO is responsible for verifying the accuracy of the claimed expenditure, ensuring businesses receive the correct tax benefit. Together, these agencies ensure that the incentive operates effectively while maintaining compliance and transparency.
Eligible companies can apply for the R&D Tax Incentive from the 1st of July each financial year for eligible R&D activities and expenses incurred in the previous financial year. Businesses have up to ten months (until the end of April) each year to lodge their claim. For example, a company lodging a claim on 1st July 2024 can apply for eligible R&D activities and expenditures incurred during the 2023-24 financial year (1st July 2023 to 30th June 2024).
Each year, over 12,000 Australian companies claim the R&D Tax Incentive, with total R&D expenditure exceeding $11.5 billion annually. Notably, around 48% of claims come from small businesses, demonstrating that access to the incentive is not limited to large corporations. However, strict eligibility requirements must be met before a company can submit a claim. Businesses must carefully assess whether their activities meet the government’s criteria and ensure they are documenting their work correctly to qualify for the benefit.
To be eligible, companies must have a minimum of $20,000 in R&D-related expenditure (unless working with a registered Research Service Provider) and can claim up to a maximum of $150 million. The benefit received varies based on the company’s annual turnover and financial position. Businesses with a turnover under $20 million may receive a refundable tax offset, meaning they can receive a cash refund of their corporate tax rate plus an 18.5% premium, equating to a benefit of between 18.5% and 43.5%. Companies with a turnover exceeding $20 million receive a non-refundable tax offset, which is calculated based on their R&D intensity (the proportion of total business expenditure allocated to R&D). There are two premium increments:
- R&D intensity up to 2% receives a tax offset equal to the company tax rate plus 8.5% premium.
- R&D intensity above 2% receives a tax offset equal to the company tax rate plus 16.5% premium.
To accurately calculate your estimate R&D benefit, try our R&D Calculator tool.
Navigating the R&D Tax Incentive can be complex, and with the responsibility of compliance resting on company directors, working with an experienced R&D tax consultant is crucial. The program is self-assessed, meaning errors in eligibility, documentation, or expenditure allocation can lead to penalties, audits, or the need to repay benefits. Engaging a registered R&D tax agent with expertise in your industry significantly reduces these risks while ensuring you maximise your eligible claim.
At prmpt., our team of specialist R&D consultants has a proven track record of securing R&D benefits for businesses across technology, manufacturing, biotech, software, and other innovative sectors. We provide end-to-end support, from eligibility assessments to audit-ready documentation, ensuring your claim is accurate, compliant, and fully optimised. With our direct, results-driven approach, we simplify the process, allowing you to focus on innovation while we handle the complexities of your R&D claim.
We also provide a range of free tools and resources, including an R&D Eligibility Test and R&D Calculator, to determine whether a company qualifies for the incentive and estimate the potential tax benefit.
Why Choose prmpt. for Applications & Consulting?
- Be incorporated under Australian or foreign law- Have eligible R&D expense greater than $20,000 (unless you are a registered Research Service Provider) for the relevant financial year
- Be conducting eligible R&D activities that include (but are not limited to):
- Researching the development of potential products due to a lack of public knowledge available
- Creating new products or services that are unique to your industry
- Improving or modifying a product, service or process OR changing the way it is produced by developing new knowledge
- Developing new knowledge/methods of completing tasks where the outcome is often unknown
- Maintain accurate supporting documentation and evidence of eligible activities & expenses