Transition from the R&D tax concession to the R&D tax incentive
We jointly administer the research and development (R&D) tax concession and R&D tax incentive with AusIndustry.
Before 1 July 2011, the R&D tax concession allowed companies to claim a tax deduction in their income tax return of up to 125% (and in some cases up to 175%) of eligible expenditure on R&D activities.
The R&D tax concession continues to apply and be administered for income years starting before 1 July 2011. As a result, R&D expenditure incurred, and the use of depreciating assets in an income year starting before 1 July 2011, must continue to be claimed under the R&D tax concession.
The former R&D tax concession provisions were contained in Division 3A of Income Tax Assessment Act 1936 (Sections 73A to 73Z). They were repealed by Tax Laws Amendment (Research and Development) Act 2011.
The R&D tax incentive provides tax offsets to encourage more companies to engage in R&D and has two core components:
- a 43.5% refundable tax offset for certain eligible R&D entities with an aggregated turnover of less than $20 million per annum
- a 38.5% non-refundable tax offset for all other eligible R&D entities. Unused offset amounts may be able to be carried forward for use in future income years.
The rate of the R&D tax offset is reduced to the company tax rate (currently 30%) for that portion of an entity’s notional R&D deductions that exceeds $100 million for an income year. This change applies to assessments for income years starting on or after 1 July 2014 and before 1 July 2024.
Rules and provisions were introduced with the R&D tax incentive to:
- ensure that, despite the repeal of the R&D tax concession provisions, those provisions can still apply to certain things done (for example, expenditure that has been incurred) before they were repealed
- establish special transitional arrangements to broadly address some situations that extend over income years where the R&D tax concession provisions and the R&D tax incentive provisions apply.
AusIndustry provides information about transitional arrangements for:
- registering activities
- assessments by AusIndustry and decisions by Innovation Australia
- existing certificates or determinations
- registering research service providers (previously known as a registered research agency)
Visit the ‘Contact Us’ page on the business.gov.au website for details on how to contact AusIndustry via phone (13 28 46), email or web chat.