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How the R&D Tax Incentive Works – A Clear Guide for Australian Businesses

To begin.
The R&D Tax Incentive is one of Australia’s most valuable government programs for innovative businesses, but it is also one of the most misunderstood. Many companies are eligible without realising it, while others miss out due to incomplete records or uncertainty about the rules.

In essence, the R&D Tax Incentive is an incentive provided through the use of tax offsets. These offsets can result in a cash benefit today.

What is it?
The R&D Tax Incentive provides a tax offset to encourage companies to conduct eligible research and development activities:

Turnover under $20 million - refundable tax offset, usually 43.5% of eligible R&D expenditure.
Turnover over $20 million - non-refundable tax offset applied at the company tax rate plus an intensity-based premium. As a general guide for this more detailed calculation, it is 8.5% to 16.5% above the company tax rate, which often equates to roughly 33.5%+ (estimation guide only).

The actual benefit depends on your profit or loss position, any carried-forward tax losses, your tax rate, and your total eligible spend.

You should also be aware that the tax benefit of the R&D expenditure is added back in the tax reconciliation for your company tax return. In practice, this means the program primarily works by bringing forward the benefit of your R&D spend into the current year, with an additional uplift. The key advantage for most companies is improved cash flow, which can help fund further innovation.

Who is elgible?

You may be eligible if your company:

Is incorporated in Australia.
Is undertaking experimental activities to solve a technical or scientific problem.
Can demonstrate the outcome could not be known in advance.
Keeps contemporaneous records of activities and associated costs.

What can be claimed?
Eligible expenditure can include:

Salaries and wages for staff directly involved in R&D.
Contractor costs.
Certain indirect overheads, direct materials and consumables.
Decline in value of R&D assets.

Why use a Registered R&D Tax Agent?
While it’s possible to prepare and lodge your own R&D Tax Incentive claim, the program is complex, and the rules change regularly. A Registered R&D Tax Agent can:

Review your activities and expenditure for eligibility.
Assist with structuring and record-keeping.
Upskill your team so future claims are easier and more robust.
Finalise the R&D tax schedule for your company tax return with full supporting notes and workings.

This combination reduces risk, improves claim quality, and ensures your benefit is supported if reviewed or audited by the ATO or DISR.

Our role.
At Link R&D Advisory, we manage the process from start to finish:

Identifying and documenting eligible R&D activities.
Guiding evidence collection.
Calculating eligible expenditure.
Preparing the R&D tax return schedule with full calculation notes and workings for your accountant to lodge with the ATO.

Why it matters to get it right.
The program is compliance-heavy, and recent changes have increased scrutiny. Having the right processes and evidence is critical to securing your benefit and protecting it in the event of an audit.

Key offical resources.

It’s always worth going directly to the source. The R&D Tax Incentive is jointly administered by the ATO and the Department of Industry, Science and Resources (DISR).

DISR: Overview of the R&D Tax Incentive

ATO: Research and Development Tax Incentive

Want to know if your business might qualify? Contact us for a no-obligation discussion.