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Turnover, Ownership and Control: The R&DTI Threshold For Larger Groups
The R&D Tax Incentive has a threshold that most small claimants don’t need to consider, because it just never affects them. Once a business has a substantial shareholder, or sits inside a group, it starts to have implications, and in a way that is easy to overlook.
The threshold is about turnover, but that turnover is for the group, not just the company. What actually decides who is in that group is control.
Why the threshold matters.
The R&D tax offset currently (September 2026) comes in two forms. A company with group aggregated turnover under $20 million receives a refundable offset that can be paid out as cash, even in a loss year. At $20 million or more, the offset is non-refundable, it reduces tax payable but is not paid out.
For an established, profitable company the difference is largely a rate and timing question. For a pre-revenue or loss-making company it is the whole benefit, because the cash refund is working capital. Crossing the $20 million line is not a marginal event.
"Turnover" means aggregated turnover.
The trap is the word aggregated. The test does not look only at a company's own income. Under the grouping rules, aggregated turnover includes the turnover of the company plus the turnover of any entity that is connected with it, and any entity that is its affiliate, leaving out dealings between them.
So a company with modest revenue of its own can be pushed over $20 million by the turnover of a larger entity it is grouped with. Whether that happens comes down to control.
The clearer line of direct control.
The clearest form of control is ownership. Broadly, an entity controls a company where it, together with its affiliates, holds interests carrying at least 40% of the voting power, or at least 40% of the rights to distributions of income or capital (section 328-125). At or above that line the entities are connected, and their turnovers are combined.
40% is the number most people know. It is also where most people stop looking.
The less clear indirect control.
Control can also be indirect. Where one entity controls a second, and the second controls a third, the first is taken to control the third. Control cascades down a chain of entities (subsection 328-125(7)). A holding that looks small at the top of a structure can still carry control several layers down.
There is an exception. The indirect control rule does not apply where the interposed entity is a public entity, a listed company, a publicly traded unit trust, or a mutual insurer (subsection 328-125(8)). A listed company sitting in the chain can break the indirect link. It does not break direct control, if the ownership percentage is met directly, the exception does not save you.
Then there is the affiliate limb, which sits outside ownership altogether. An entity can be an affiliate where it acts, or could reasonably be expected to act, in accordance with the company's directions or wishes, or in concert with it (section 328-130). This is a question of fact about the actual relationship, not a percentage. It can apply below the 40% line, and it is the reason a large minority shareholder with real influence cannot simply be assumed to sit outside the group because it holds less than 40%.
An affiliate relationship is not automatic. A shareholding, a supply arrangement, or a single board seat does not by itself make an entity an affiliate. But it does mean the relationship has to be assessed on its facts, rather than waved through on the percentage alone.
As always, change.
The threshold itself may be moving. The 2026-27 Budget proposed lifting the aggregated turnover threshold for the refundable offset from $20 million to $50 million, applying to income years commencing on or after 1 July 2028. If legislated as proposed, it would bring a number of mid-sized groups back into the refundable tier.
There is no exposure draft at the time of writing. It is worth watching, but it is not something to restructure around yet.
Things to consider.
End point.
Getting this right is less about the R&D itself than about the structure around it. It rarely surfaces until a claim is being prepared or reviewed. By which point the facts are already fixed. It is far easier to test in advance.
This article was posted on 3 September 2026. It is general information, not advice, and reflects the position at the time of writing. The Budget measure described is a proposal and is not law. If you would like to discuss how the grouping rules affect your claim, please get in touch.
Government resources.