Australia R&D Tax Incentive

Australia R&D Tax Incentive Skill v1.2

Australia R&D Tax Incentive Skill v1.2

General reference only. This skill is general tax/accounting reference material for AI-assisted workflows. It has not been reviewed for any specific person's facts, documents, elections, deadlines, residency, filing status, or local procedures. Do not rely on it to file, pay, amend, or take a tax position without review by a qualified professional in the relevant jurisdiction.

Law-change context. The R&DTI was reformed for income years starting on or after 1 July 2021 (Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Act 2020): the old flat 43.5% refundable and 38.5% non-refundable rates were replaced with company-tax-rate-plus-premium rates and a two-tier R&D intensity test; the expenditure cap rose from $100m to $150m; a uniform clawback rule and Part IVA were extended to the offset. From income years starting on or after 1 July 2025, R&D activities relating to tobacco or gambling are ineligible unless conducted for the sole purpose of harm minimisation. The statutory four-year amendment period applies to R&D claims. Verify all rates before relying.

AUDIT FLASH POINT The R&DTI is one of the ATO's most actively audited concession areas. Whether an activity is a "core R&D activity" is a technical/engineering judgement about scientific uncertainty and the knowledge threshold, NOT an accounting judgement. Registration is with AusIndustry/DISR; the offset is claimed with the ATO. Both agencies run compliance programs, and expenditure claimed is published in an annual transparency report.

Section 1 -- Quick reference

Read this whole section before computing or classifying anything.

Quick reference

Field	Value
Country	Australia
Primary Legislation	ITAA 1997 Division 355; Industry Research and Development Act 1986 (IR&D Act)
Administrators	Australian Taxation Office (offset/expenditure) + AusIndustry/DISR (registration, activity eligibility, findings) on behalf of Industry Innovation and Science Australia
Income Year	2026-27 (1 July 2026 -- 30 June 2027)
What it is	A tax OFFSET for eligible R&D, claimed in the company tax return. NOT a grant.
Eligible entity	Corporation only (R&D entity, s 355-35): incorporated under Australian law; OR foreign-incorporated but Australian tax resident; OR foreign-incorporated, DTA-country resident, carrying on business through a permanent establishment
Not eligible	Individuals/sole traders, partnerships (except R&D partnerships claiming at partner level), trusts (except a body corporate as trustee of a public trading trust), corporate limited partnerships, exempt entities (wholly income-tax exempt)
Refundable offset	Aggregated turnover < $20m AND not controlled by exempt entities: company tax rate + 18.5% premium (= 43.5% for a 25% base-rate entity)
Non-refundable offset	Aggregated turnover >= $20m OR exempt-controlled: company tax rate + 8.5% premium (R&D up to 2% intensity); company tax rate + 16.5% premium (R&D above 2% intensity)
Expenditure cap	$150m notional deductions per year; offset rate drops to the bare company tax rate above it
Minimum spend	$20,000 notional deductions, UNLESS via a registered Research Service Provider (RSP) or CRC contribution
Registration deadline	With DISR each income year, normally within 10 months of year end; extensions under Rule 7. Valid registration required before claiming
Amendment window	4 years (generally), tied to DISR findings
Contributor	Open Accountants
Validated by	Pending

Conservative defaults

Ambiguity	Default
Unknown whether an activity is core R&D	Do NOT self-classify. This is a technical/engineering judgement about scientific uncertainty -- escalate (R-AU-RD-1)
Unknown registration status	Assume NOT registered; confirm the DISR registration (IISA) number and that it matches the income year before computing any offset
Unknown aggregated turnover	Compute the group figure (entity + connected + affiliated, net of intra-group dealings) before choosing refundable vs non-refundable; do not guess
Software development claimed	Assume the internal-administration exclusion may apply; test dominant purpose before treating as core R&D
Business-as-usual / routine activity claimed	Treat as ineligible ordinary business activity until shown to involve scientific uncertainty and the scientific method (TA 2017/3)
Feedstock output sold or used	Assume a feedstock adjustment is triggered; quantify
Overseas R&D activity	Assume NOT claimable unless a positive DISR overseas finding (s 28D IR&D Act) is in place
Expenditure incurred to an associate	Notionally deductible only when PAID, not merely incurred

Section 2 -- What it is and who can claim

The R&DTI is a tax offset claimed through the company tax return. It is not a grant: there is no application for funding, no competitive round, and no payment independent of the tax system. The benefit is delivered as an offset against tax, and for small companies the excess over tax liability is paid out in cash. Eligible expenditure MUST be claimed under the R&DTI -- if you choose not to claim it under the R&DTI, you cannot deduct it elsewhere in the return (unlike the former R&D tax concession).

The offset rate and refundability depend primarily on aggregated turnover and exempt-entity control, NOT on the size of the R&D spend.

• Refundable offset -- aggregated turnover < $20m AND not controlled by one or more exempt entities. Rate = company tax rate + 18.5%. For a base-rate entity (25%) this is 43.5%. Where the offset exceeds tax liability the balance is refunded in cash (subject to franking-debit deferral rules).
• Non-refundable offset -- aggregated turnover >= $20m OR controlled by exempt entities. Rate = company tax rate + a premium set by R&D intensity (see Rule 5). It reduces tax; any unused amount may be carried forward under the tax offset carry-forward rules. It is never refunded.

Section 3 -- GL sweep library

R&DTI work starts with the general ledger and the project/time records, not the offset claim the client hopes to make.

GL sweep library

GL pattern	Likely issue	Action
R&D expense / "R&D project" cost centres	Candidate notional deduction	Map each account to a registered DISR activity; confirm it is core or supporting, not BAU
Project codes / job codes linked to a DISR registration number	Expenditure linked to registered activities	Trace to the registration (IISA number) for the correct income year; confirm the statutory or approved extended deadline was met
Payroll allocations / timesheet-coded wages to R&D projects	Salary notional deduction	Substantiate time via timesheets/job cards; apportion between R&D and non-R&D on a reasonable, documented basis
Contractor / RSP invoices for R&D	External R&D expenditure	Confirm the RSP is registered with DISR; if under $20k total, the RSP pathway is what preserves eligibility
Depreciation on assets used in R&D	Asset cost is NOT notionally deductible	Use decline-in-value notional deductions instead; do not claim the asset's acquisition cost
Government grant income (recoupment) for R&D	Clawback adjustment	A recoupment for claimed R&D triggers a clawback (assessable income), not a reduction of the grant
"R&D" account holding rent, marketing, admin overhead	Ineligible / apportionment risk	Remove general operations and marketing; apply a reasonable, documented apportionment methodology only where there is a direct link
Software development capitalised/expensed	Internal-administration exclusion risk	Test dominant purpose; internal admin software for the entity/connected/affiliate is excluded from core
Intercompany charges to associates for R&D	Notional deduction only when PAID	Claim in the year paid, not incurred; check TA 2023/4 (R&D delivered by associates)
Materials/feedstock consumed in trials	Feedstock adjustment on sale/own use of output	Track feedstock inputs and outputs; quantify the adjustment in the trigger year

Section 4 -- Worked examples

Example 1 -- Small company refundable offset (43.5%)

Innovate Pty Ltd (2026-27): aggregated turnover $4.2m, not exempt-controlled, base-rate entity (company tax rate 25%). Notional R&D deductions $300,000 on registered activities. Taxable income before offset $150,000.

Offset rate = 25% + 18.5% = 43.5%
R&D offset = $300,000 x 43.5% = $130,500
Gross tax = $150,000 x 25% = $37,500
Tax after offset = $37,500 - $130,500 = -$93,000
Refund (cash) = $93,000   (excess offset refunded; franking-debit deferral applies)

The $93,000 is paid out in cash. This is the refundable offset's core feature: it funds loss-making R&D companies.

Example 2 -- Loss-making small company (full refund)

StartUp Co (2026-27): aggregated turnover $1.8m, notional R&D deductions $250,000, tax loss for the year (no tax payable).

R&D offset = $250,000 x 43.5% = $108,750
Tax liability = $0
Refund = $108,750 (entire offset refunded in cash)

A small R&D company with no tax liability still receives the offset as cash. The notional deduction itself is not also claimed as a deduction -- the offset replaces it.

Example 3 -- Larger company non-refundable offset with intensity tiers

BigCo Ltd (2026-27): aggregated turnover $80m, standard company tax rate 30%, not exempt-controlled. Total expenditure $200m; notional R&D deductions $8m.

R&D intensity = $8m / $200m = 4%
First 2% of total expenditure = 2% x $200m = $4m  -> CTR + 8.5% = 38.5%
Above 2% (remaining $4m)                             -> CTR + 16.5% = 46.5%

Offset = ($4,000,000 x 38.5%) + ($4,000,000 x 46.5%)
       = $1,540,000 + $1,860,000
       = $3,400,000  (non-refundable; reduces tax, excess carried forward)

Example 4 -- Expenditure cap ($150m)

Company XYZ (2026-27): aggregated turnover $600m, company tax rate 30%. Total expenditure $250m; notional R&D deductions $170m.

2% of total expenditure = 2% x $250m = $5m            -> 30% + 8.5%  = 38.5%
Remaining intensity band to $150m = $150m - $5m = $145m -> 30% + 16.5% = 46.5%
Above the $150m cap = $170m - $150m = $20m             -> 30% (no premium)

Offset = ($5m x 38.5%) + ($145m x 46.5%) + ($20m x 30%)
       = $1,925,000 + $67,425,000 + $6,000,000
       = $75,350,000

Above $150m of notional deductions, the offset rate collapses to the bare company tax rate, so the R&D premium (the incentive component) is nil on the excess.

Example 5 -- Feedstock adjustment (clawback)

Landscape Supplies Pty Ltd: aggregated turnover $15m (base-rate 25%, refundable 43.5%). Notional R&D deductions $22,000, including $10,000 feedstock expenditure. The granite-sand output is sold for $9,000 in the same year.

Step 1: clawback amount = lesser of feedstock expenditure ($10,000) and
        feedstock revenue ($9,000) = $9,000
Step 2: incentive component = (starting offset - adjusted offset - deduction amount)
        starting offset = $22,000 x 43.5% = $9,570
        adjusted offset = ($22,000 - $9,000) x 43.5% = $5,655
        deduction amount = $9,000 x 25% = $2,250
        = $9,570 - $5,655 - $2,250 = $1,665
Step 3: gross up to assessable income = $1,665 / 25% = $6,660

$6,660 is added to assessable income. The clawback recovers only the 18.5% incentive premium on the feedstock, not the base deduction equivalent.

Section 5 -- Tier 1 rules

Rule 1 -- It is an offset, not a grant

• It is an offset, not a grant — The R&DTI produces a tax offset under Division 355. It is claimed in the company tax return via the R&D schedule, and is administered jointly: DISR/AusIndustry registers activities and rules on their eligibility (including advance and overseas findings); the ATO administers the offset and the expenditure claimed. Receiving a DISR registration number means only that a complete application was received -- it is NOT a ruling that the activities qualify. Both agencies can take compliance action before or after the offset is paid, and claimed R&D expenditure is published in an annual transparency report (two years after year end). (Division 355)

Rule 2 -- Eligible entity (s 355-35)

• Eligible entity — Only a corporation can be an R&D entity: incorporated under Australian law; or foreign-incorporated but an Australian tax resident; or foreign-incorporated, resident in a DTA country whose treaty defines "permanent establishment", and carrying on business in Australia through that PE. Not eligible: individuals (sole traders), partnerships as such (partners in an R&D partnership may claim at partner level), trusts (except a body corporate as trustee of a public trading trust), corporate limited partnerships, and exempt entities whose income is wholly exempt. Consolidated/MEC groups claim through the head company only. (s 355-35)

Rule 3 -- Core R&D activities

• Core R&D activities — Experimental activities: (a) whose outcome cannot be known or determined in advance on the basis of current knowledge, information or experience; (b) determined only by applying a systematic progression of work based on established science, proceeding from hypothesis to experiment, observation and evaluation to logical conclusions; and (c) conducted for the purpose of generating new knowledge (including new or improved materials, products, devices, processes or services). All three limbs must be met. This is a scientific/technical test, not an accounting one -- whether the outcome "cannot be known in advance" turns on the state of knowledge in the field, which is a judgement for a competent engineer/scientist, not the bookkeeper.

Rule 4 -- Supporting R&D activities

• Supporting R&D activities — Activities directly related to core R&D activities. Where the activity produces (or is directly related to producing) goods or services, or is one of the excluded-core categories, it must ALSO have been undertaken for the dominant purpose of supporting a core R&D activity. Supporting activities never stand alone -- they exist only in relation to an eligible core activity.

Rule 5 -- Offset rates and the intensity tiers

• Offset rates and the intensity tiers — - Refundable (aggregated turnover < $20m, not exempt-controlled): company tax rate + 18.5%. Base-rate (25%) entity = 43.5%; standard-rate (30%) entity = 48.5%. - Non-refundable (>= $20m or exempt-controlled): company tax rate + 8.5% on notional deductions up to 2% R&D intensity, and company tax rate + 16.5% above 2%. R&D intensity = notional R&D deductions / total expenditure for the year. - $150m cap: for notional deductions above $150m in a year, the offset rate is the bare company tax rate (no premium). For years commencing before 1 July 2021 the cap was $100m.

Rule 6 -- Excluded core activities (s 355-25(2))

• Excluded core activities — The following CANNOT be core R&D activities (though some may qualify as supporting if directly related and dominant-purpose tests are met): 1. Market research/testing/development or sales promotion (incl. consumer surveys). 2. Prospecting, exploring or drilling for minerals or petroleum (to discover, locate, size or value deposits). 3. Management studies or efficiency surveys. 4. Research in the social sciences, arts or humanities. 5. Commercial, legal and administrative aspects of patenting, licensing or other IP activities. 6. Activities associated with complying with statutory requirements or standards (incl. routine testing/analysis). 7. Reproduction of a commercial product or process (by physical examination or from plans/public information). 8. Developing, modifying or customising computer software for the dominant purpose of internal administration of the entity or a connected/affiliated entity. Tobacco and gambling: from income years starting on or after 1 July 2025, activities relating to tobacco or gambling are ineligible as core or supporting unless conducted for the sole purpose of harm minimisation. (s 355-25(2))

Rule 7 -- Registration and the 10-month deadline

• Registration and the 10-month deadline — Register activities with DISR for each income year before claiming the offset. The normal deadline is 10 months after year end, for example 30 April 2027 for a 30 June 2026 year end. The IISA registration number on the R&D schedule must match the income year. Registration does not certify activity eligibility. If the deadline cannot be met or has passed, refer the entity to DISR or its R&D adviser to request an extension through the R&DTI customer portal, with reasons and supporting evidence. Approval is discretionary. Extensions generally cannot exceed 92 days after the statutory deadline; a related pending decision is the exception. Confirm valid registration within the statutory or approved extended period before claiming. A late application alone does not establish entitlement. DISR cannot extend the application deadline for an advance or overseas finding or accept those applications late. See DISR: request an extension or variation and Part 3 of the Industry Research and Development Decision-making Principles 2022. (Industry Research and Development Decision-making Principles 2022, Part 3)

Rule 8 -- The $20,000 threshold and the RSP exception

• The $20,000 threshold and the RSP exception — Notional deductions for the year must total at least $20,000. This threshold does NOT apply where the R&D is conducted by a registered Research Service Provider (RSP) on the entity's behalf, or the entity contributes to the Cooperative Research Centres (CRC) program. RSPs must themselves register annually with DISR.

Rule 9 -- Aggregated turnover grouping

• Aggregated turnover grouping — Aggregated turnover = the entity's annual turnover + the annual turnover of every connected entity and affiliate (Australian and foreign) for the period they are connected/affiliated, excluding dealings between them. The rules mirror the small-business-entity aggregated-turnover rules. This grouping decides refundable vs non-refundable, so it must be computed across the whole group before the offset rate is chosen (R-AU-RD-5).

Rule 10 -- Notional deductions: what can and can't be claimed

• Notional deductions: what can and can't be claimed — Eligible expenditure on registered activities is claimed as a notional deduction in the year incurred. Exceptions: amounts incurred to an associate are claimable only when PAID; prepayment rules apply to services spanning years. Cannot be notionally deducted: interest expenditure; expenditure not "at risk" (TR 2021/5); core technology expenditure; expenditure included in the cost of a depreciating asset (decline-in-value notional deductions may apply instead); and expenditure to acquire/construct/improve a building. Eligible R&D expenditure must be claimed under the R&DTI or not at all. (TR 2021/5)

Rule 11 -- Clawback: feedstock, recoupments, balancing adjustments

• Clawback: feedstock, recoupments, balancing adjustments — A clawback event adds an amount to assessable income (it does not reduce the offset) to recover the incentive/premium component. Triggers: (a) a government recoupment/grant for expenditure already claimed; (b) a feedstock adjustment where claimed feedstock inputs are transformed into products supplied to others or applied to own use; (c) an assessable balancing adjustment on disposal of an R&D asset (a deductible balancing adjustment gives a "catch-up" deduction instead). The clawback is the premium component grossed up to an assessable-income equivalent (see Example 5). From 1 July 2021 Part IVA extends to the R&D offset, including schemes to obtain a refundable rather than a non-refundable offset.

Rule 12 -- Amendment and objection windows

• Amendment and objection windows — The amendment period for R&D claims is generally 4 years (a 2-year period may apply to 2021-22 and earlier). Special rules allow amendment outside the standard window to give effect to DISR findings (registration, overseas activities, core technology) and to DISR internal-review, ART or court decisions. DISR findings bind the Commissioner: the ATO must amend to give effect to them, and will commence an audit 28 days after a finding if the taxpayer does not self-amend.

Rule 13 -- Interaction with the instant asset write-off and small business concessions

• Interaction with the instant asset write-off and small business concessions — An R&D entity can be a small business entity and use the instant asset write-off ($20,000 for 2025-26; permanent threshold enacted with 1 October 2026 commencement and specified application from 1 July 2026 under Tax Reform No. 2 Act 2026, section 2 and schedules 1-2) for assets used in the business. But the R&DTI and IAWO interact at the asset-cost level: expenditure included in the cost of a depreciating asset is NOT a notional deduction, so an amount immediately written off under the IAWO is not also claimable as R&D expenditure. Instead, the R&DTI gives a notional deduction for the asset's decline in value to the extent of R&D use. Do not double-count an asset's cost across both concessions. The aggregated-turnover grouping rules are shared with the small business concessions, but the R&DTI has its own $20m threshold and exempt-entity-control test, which are not the same as the small business entity tests. (Tax Reform No. 2 Act 2026, section 2 and schedules 1-2)

Section 6 -- Tier 2 catalogue

T2-1 -- Core vs ordinary business activity

• Core vs ordinary business activity — Trigger: claim includes routine, business-as-usual, or commercial-risk activities. Issue: TA 2017/3 targets claims for ordinary business activities dressed as R&D (no scientific uncertainty, no hypothesis-driven experiment, no new knowledge). Action: refuse classification (R-AU-RD-1); document; escalate. (TA 2017/3)

T2-2 -- Software development claims

• Software development claims — Trigger: software development claimed as core R&D. Issue: internal-administration software for the entity/connected/affiliate is excluded from core; even non-internal-admin software must still clear the knowledge threshold (outcome not knowable in advance). Much routine development fails. Action: test dominant purpose and the knowledge threshold; escalate (R-AU-RD-1).

T2-3 -- R&D delivered by associates / overseas related entities

• R&D delivered by associates / overseas related entities — Trigger: notional deductions for R&D performed by an associate, or overseas R&D by a foreign related entity. Issue: amounts to associates claimable only when paid (TA 2023/4); overseas activities need a positive DISR overseas finding and must be conducted FOR the claimant, not the foreign entity. Action: confirm payment and findings; escalate (R-AU-RD-4). (TA 2023/4)

T2-4 -- Overhead apportionment

• Overhead apportionment — Trigger: rent, utilities, admin overheads apportioned to R&D. Issue: apportionment must reflect the actual extent of R&D use on a reasonable, documented basis; salary-based ratios are appropriate for personnel but not necessarily for utilities. Action: sight the documented methodology; flag unreasonable apportionment.

T2-5 -- Group aggregation and Part IVA

• Group aggregation and Part IVA — Trigger: aggregated turnover near the $20m threshold, or group structures that appear to engineer a refundable rather than non-refundable outcome. Issue: connected/affiliate turnover must be aggregated; from 1 July 2021 Part IVA can cancel an offset (including a refundability benefit) where the dominant purpose was to obtain it. Action: compute group turnover properly; escalate structuring (R-AU-RD-5).

T2-6 -- "At risk" expenditure

• "At risk" expenditure — Trigger: R&D funded under arrangements guaranteeing a return, or covered by an indemnity. Issue: expenditure not at risk is not claimable (TR 2021/5). Action: examine funding terms; escalate. (TR 2021/5)

Section 7 -- Refusal catalogue

These are deliberate refusal-and-escalate zones. Do NOT answer them from this skill.

• R-AU-RD-1 — Whether a specific activity qualifies as a core or supporting R&D activity ("Whether an activity is R&D is a technical/engineering judgement about scientific uncertainty and the knowledge threshold under s 355-25, not an accounting judgement. This needs a competent professional in the field and, for certainty, an AusIndustry/DISR advance finding. I can help organise the project documentation but cannot classify the activity.") (s 355-25)
• R-AU-RD-2 — Preparing or lodging the DISR registration application ("Registration is a self-assessed application to AusIndustry/DISR describing the activities against the legislative criteria. I can't draft or lodge it. Refer to AusIndustry (13 28 46) or a registered R&D tax adviser. The normal deadline is 10 months after year end; assess the Rule 7 extension route if late.")
• R-AU-RD-3 — Advance findings, overseas findings, or binding certainty on eligibility ("Only DISR can make an advance finding (activity eligibility) or an overseas finding (s 28D IR&D Act). These are binding decisions for your specific facts. Refer to AusIndustry; I can help assemble the supporting records.") (s 28D IR&D Act)
• R-AU-RD-4 — Overseas R&D activities ("Activities conducted overseas are claimable only with a positive DISR overseas finding, and only where conducted for the claimant (not a foreign related entity). This needs the finding in place before claiming. Refer to AusIndustry.")
• R-AU-RD-5 — Aggregated expenditure/turnover across connected or affiliated groups ("Aggregated turnover across connected and affiliated entities (including foreign ones) determines refundable vs non-refundable, and group structuring can attract Part IVA. Compute the group position with the client's adviser; I can prepare the underlying turnover figures per entity.")

Section 8 -- Reading guide

1. Registration first: confirm valid DISR registration for the income year within the statutory or approved extended period (Rule 7) before claiming.
2. Entity test second: only a corporation (R&D entity) can claim. A sole trader or trust "doing R&D" has no R&DTI pathway.
3. Activity test third: core activities must clear all three limbs (unknowable outcome, systematic progression, new knowledge) -- and that is a technical judgement this skill refuses to make.
4. Rate test fourth: aggregated turnover and exempt-entity control choose refundable vs non-refundable; intensity tiers set the non-refundable premium.
5. Expenditure test fifth: only eligible notional deductions on registered activities count; associate amounts only when paid; asset costs give decline-in-value, not cost.
6. Clawback always: grants, feedstock outputs and asset disposals pull back the premium through assessable income.

Section 9 -- Onboarding fallback

If the client provides only financial statements:

1. Sweep the GL per Section 3 for R&D-coded accounts, project codes and payroll allocations.
2. Confirm the entity is a corporation and request the DISR registration (IISA) number for the relevant income year.
3. Request timesheets, project plans and the apportionment methodology -- do not accept bare account balances.
4. Compute aggregated turnover across connected/affiliated entities before selecting an offset rate.
5. Flag: "Figures prepared from financial statements only. DISR registration number, contemporaneous project documentation, timesheets, apportionment methodology and group turnover not sighted. Activity eligibility is a technical judgement requiring review. No position should be taken until a qualified R&D tax adviser confirms."

Section 10 -- Reference material

Key figures

Key figures

Item	Value
Refundable offset (turnover < $20m, not exempt-controlled)	Company tax rate + 18.5% (43.5% for a 25% base-rate entity)
Non-refundable offset	Company tax rate + 8.5% (R&D <= 2% intensity); + 16.5% (R&D > 2% intensity)
R&D intensity	Notional R&D deductions / total expenditure for the year
Expenditure cap	$150m notional deductions; offset drops to bare company tax rate above it
Minimum notional deduction	$20,000 (waived for registered RSP / CRC)
Registration deadline	Normally 10 months after income year end, each year; Rule 7 covers extensions. Register before claiming
Amendment period	Generally 4 years; special rules give effect to DISR findings
Tobacco/gambling	Ineligible for income years from 1 July 2025 unless sole-purpose harm minimisation

Primary sources (verified 20 August 2026)

Primary sources

Topic	Source
Statute	ITAA 1997 Division 355 (ss 355-1 to 355-750); s 355-25 (core activities/exclusions); s 355-35 (R&D entity); Industry Research and Development Act 1986, s 28D (overseas findings)
Rates/entitlements	ato.gov.au -- R&D tax incentive rates and entitlements (QC 107282, 70869, 70890, updated 13 May 2026)
Eligibility	ato.gov.au -- Eligibility for the R&D tax incentive (QC 70871, updated 13 May 2026)
Steps/registration/records	ato.gov.au -- Steps for claiming R&D tax offset (QC 70872); Keeping records and calculating notional deductions (QC 71853)
Excluded activities	business.gov.au -- Excluded R&D activities under the R&DTI (s 355-25(2) ITAA 1997)
Clawback/feedstock	ato.gov.au -- Clawback of R&D tax incentive offset (QC 70876, 70889); TR 2013/3 (feedstock); TR 2021/5 (at-risk rule)
Compliance	ato.gov.au -- Helping you get R&D claims right (QC 70873); TA 2017/3 (ordinary business activities); TA 2023/4 (associates)
Amendments	ato.gov.au -- Correcting mistakes and disputing decisions (QC 70877)
Registration extensions (checked 11 September 2026)	DISR: request an extension or variation; Industry Research and Development Decision-making Principles 2022, Part 3

Test suite

Test 1: 25% base-rate entity, turnover $4m, notional deductions $300,000. -> Offset = $300,000 x 43.5% = $130,500 (refundable).

Test 2: Sole trader spends $80,000 on genuine R&D. -> No R&DTI claim: not an R&D entity.

Test 3: 30% entity, total expenditure $200m, notional deductions $8m. -> Intensity 4%; offset = ($4m x 38.5%) + ($4m x 46.5%) = $3,400,000 (non-refundable).

Test 4: Notional deductions $170m, total expenditure $250m, 30% entity. -> Offset $75,350,000; the $20m above the $150m cap earns only the bare 30%.

Test 5: Notional deductions $18,000, no RSP/CRC. -> Below the $20,000 threshold; no claim.

Test 6: Software built to run the claimant's own payroll. -> Internal-administration software; excluded from core R&D activities.

Test 7: Registration lodged 11 months after year end without an approved extension. -> Late under the normal deadline. Refer for an extension request with reasons and evidence; keep the claim pending until valid registration is confirmed. Approval is not automatic. Apply the 92-day limit and related-pending-decision exception in Rule 7. A late advance or overseas finding application has no extension route.

Test 8: Feedstock revenue $9,000, feedstock expenditure $10,000, 43.5% offset, 25% CTR. -> $6,660 added to assessable income (Example 5).

Test 9: $100,000 incurred to an associate for R&D, unpaid at year end. -> Not notionally deductible until paid.

Test 10: Company receives a $50,000 government grant recouping claimed R&D expenditure. -> Clawback: the premium component on the recouped amount is added to assessable income; the grant is not netted off.

Prohibitions

• NEVER treat the R&DTI as a grant -- it is a tax offset claimed in the company return
• NEVER classify an activity as core/supporting R&D -- that is a technical/engineering judgement (R-AU-RD-1); escalate
• NEVER prepare or lodge the DISR registration application -- refer to AusIndustry (R-AU-RD-2)
• NEVER advise on advance or overseas findings -- DISR only (R-AU-RD-3, R-AU-RD-4)
• NEVER compute the offset without confirming valid DISR registration for the income year within the statutory or approved extended period
• NEVER choose refundable vs non-refundable without computing aggregated turnover across connected/affiliated entities (R-AU-RD-5)
• NEVER claim amounts incurred to an associate before they are paid
• NEVER claim the cost of a depreciating asset -- use decline-in-value notional deductions
• NEVER ignore a feedstock, recoupment or balancing-adjustment clawback
• NEVER present figures as definitive

Disclaimer

This skill and its outputs are provided for informational and computational purposes only and do not constitute tax, legal, or financial advice. Open Accountants and its contributors accept no liability for any errors, omissions, or outcomes arising from the use of this skill. All outputs must be reviewed and signed off by a qualified professional (such as a CPA, CA, tax agent, or equivalent licensed practitioner in your jurisdiction) before filing or acting upon.

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Contributed by Ryan Duguid.

Contributed by Ryan Duguid.

Contributed by Ryan Duguid.