Research and Development Tax Incentive

by | Apr 4, 2024 | Tax

The Research and Development Tax Incentive helps companies innovate and grow by offsetting some of the costs of eligible research and development (R&D). It aims to boost competitiveness and improve productivity across the economy.

To be eligible, you must do the following:

  • Conduct or plan to conduct at least one core R&D activity.
  • Assess that your core R&D activity is not an excluded core R&D activity.
  • Register your core R&D activity.
  • Only register supporting R&D activities that directly relate to a core R&D activity. In some cases, they must also be activities you conduct for the dominant purpose of supporting a core R&D activity.

You may be able to claim an offset for R&D activities conducted overseas but you must have a positive Overseas Finding before you claim.

Tax Offsets Available

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.

Changes Since 1 July 2021:

  • The refundable offset rate of 43.5% has been replaced with an offset rate of 18.5% above the company’s tax rate.
  • The flat non-refundable rate of 38.5% has been replaced with a progressive marginal tiered R&D intensity threshold:
    • For 0 to 2% intensity: An 8.5% premium to the company’s tax rate.
    • For greater than 2% intensity: A 16.5% premium to the company’s tax rate.
  • The expenditure threshold has increased from $100 million to $150 million.
  • For notional deductions above $150 million, the R&D tax offset rate is the corporate tax rate (and the R&D premium does not apply).
  • The feedstock, clawback, and adjustment provisions have been replaced with exact amounts.
  • General anti-avoidance provisions now include R&D tax offsets as a tax benefit from 1 July 2021.
  • The Australian Taxation Office (ATO) is required to publish a company’s claimed R&D expenditure, with the first publication due after 1 July 2024