Checklist for claiming the Research & Development Tax Incentive
Self-assess the eligibility of your company
The Research and Development (R&D) tax incentive provides targeted tax offsets designed to encourage more companies to engage in R&D activities.
To take advantage of the R&D tax offsets you need to be an R&D entity. An R&D entity is either a corporation that is incorporated under an Australian law or, in some circumstances, a foreign corporation.
Please check AusIndustryExternal Link or the ATO website to self-assess the eligibility of your company, or contact AusIndustryExternal Link or the ATO to confirm whether you are an R&D entity.
AusIndustry’s Program SnapshotExternal Link and R&D Tax Incentive Customer Information GuideExternal Link provide an overview of the R&D tax incentive program, including information on R&D tax incentive topics such as eligibility, self-assessment, how to register and some helpful advice on keeping good records.
Self-assess the eligibility of the R&D activities
Your research and development activities must meet certain criteria to be eligible for the R&D tax incentive. They must be classified as either ‘core R&D’ activities or ‘supporting R&D’ activities. Broadly, core R&D activities are experimental activities that both:
- are based on principles of established science
- proceed from hypothesis to experiment, observation and evaluation, and lead to logical conclusions.
Importantly, core R&D activities must be conducted for the purpose of generating new knowledge (including the creation of improved materials, products, devices, processes or services).
A supporting activity is one that is directly related to core R&D activities or, for certain activities, has been undertaken for the dominant purpose of supporting core R&D activities.
You can learn more about the different types of eligible R&D activities here.
If you are unsure about the eligibility of your R&D activities, there are different types of Findings you can apply for through Innovation Australia.
Findings provide practical certainty to program participants and allow the regulators to determine the eligibility of activities. Findings are an important aspect of the program's Integrity Assurance FrameworkExternal Link.
Keep accurate records to substantiate and demonstrate the eligibility of the activities and associated expenditure
To help you with your record-keeping requirements under the R&D tax incentive, the ATO, together with AusIndustry, have developed an R&D Tax Incentive - Record Keeping and R&D PlanningExternal Link fact sheet that provides information about what records you should keep, and for how long, to support your R&D claim.
Maintenance of good records will help companies comply and receive the maximum benefit from the R&D tax incentive, and will also minimise the costs that may be associated with a compliance review, risk review or finding.
Apply for registration
Where you have self-assessed you have undertaken eligible R&D activity and wish to claim the R&D incentive, you must register your R&D activities with AusIndustry and receive your unique registration number:
- for every income year you want to claim the offset
- within 10 months of the end of your company's income year
- prior to claiming the R&D tax offset in your company income tax return.
To register, use the Registration smart formExternal Link, which can be found and lodged via business.gov.auExternal Link at any time on or before the due date.
There is also a Sample Application FormExternal Link which provides a practical example of the type and detail of response AusIndustry is looking for to assess your application.
Registration of activities by AusIndustry is not a verification of eligibility or an approval of the payment of a tax offset.
AusIndustry and the ATO share information and work closely to ensure the integrity of the R&D tax incentive, please make sure you provide accurate and consistent details of the activities and expenses to AusIndustry in your registration, and the ATO in your R&D schedules.
Should you require further assistance in completing this form, please contact AusIndustry through business.gov.au or phone 13 28 46.
Make adjustments if necessary
You may need to make adjustments to your income tax return if:
- you have received a government recoupment
- your R&D activities have produced either marketable products or products that have been applied to your own use
- you are registered for GST.
Lodge your claim for the income year
- After registration with AusIndustry, you claim the R&D tax incentive tax offset by completing a Research and Development Tax Incentive Schedule and relevant labels of the company tax return and lodging them with the ATO. The R&D tax incentive calculator will help you to calculate your entitlement.
- Making incorrect claims may result in penalties. Ensure you only include expenditure in an R&D claim that is actually incurred on R&D activities, not other ordinary business activities. It is important the information you supply to both AusIndustry and the ATO is accurate, consistent and supported by evidence and records. Significant discrepancies in the information provided to AusIndustry and to the ATO will increase the likelihood of your company’s claim being reviewed.
- The Integrity Assurance FrameworkExternal Link provides a holistic approach to maintain program integrity and effectively manage the compliance risks.
Please check the ATO website for details to calculate and lodge the R&D claim.
Correcting mistakes and challenging decisions
Once you have lodged your registration, or your claim for the R&D tax incentive, you may find you need to:
- vary your registrationExternal Link
- amend your tax return
- if you have entered into any type of aggressive R&D arrangement, or have otherwise claimed the R&D tax incentive in relation to your normal business activities, you may want to seek independent professional advice, make a voluntary disclosure to the ATO or amend your tax return
- if AusIndustry makes a finding on your registration or the ATO conducts a review on your R&D claim, and it is determined that all or part of your R&D activities are not eligible, then your tax return will be amended and penalties and interest charges may be applied.
- object to decisions made by the ATO or AusIndustry
If you want to dispute the law as we have applied it to your case, or if you are dissatisfied with the amount of R&D tax offset we have allowed, you can object to the assessment (within certain time limits). When the ATO or AusIndustry makes a decision on your registration or claim, we will tell you how you may request a review if you are dissatisfied with the decision.
Using a tax agent or R&D consultant
- If you are going to pay someone to help you with your tax return or R&D tax incentive schedule, you should first make sure they are a registered tax agent
- Although they are usually helpful, using the services of an R&D tax adviser to assist with the preparation of a registration application and offset claim does not guarantee your claim will meet the eligibility criteria.
- Penalties may apply to participants and promoters of aggressive R&D arrangements. Registered tax agents involved in the promotion of any type of aggressive R&D arrangement may be referred to the Tax Practitioners Board to consider whether there has been a breach of the Tax Agent Services Act 2009.
Red flags of risky behaviour
It is important users and regulators of the R&D tax incentive work together to ensure the R&D tax incentive is benefiting the right people.
As a claimant:
- If you have not sought/received independent advice about your R&D claim, please discuss with your existing tax agent. Ask your agent to check
- your claim against AusIndustry’s eligibility guidelines
- the quantum of the claim by reference to the expenditure you have actually incurred on your registered R&D activities
- that you have kept adequate records.
- Be wary if you are approached by a new tax agent, or R&D consultant, proposing a potential R&D claim that seems too good to be true, for example
- they can triple your claim
- they know how to get ordinary business expenses into an R&D claim
- as a general proposition they contend that all of the cost of developing your new products qualify as R&D.
Discuss any R&D claim with your existing tax agent, and report behaviours that concern you to AusIndustry or the ATO.
To provide information about an R&D or another arrangement or a promoter of an R&D or another arrangement:
- phone us on 1800 177 006 (after the initial messages, wait for the 'Taxpayer Alert' option then press 1)
- email us at email@example.com
Useful Tools and documents for your claim
If you need more information about whether your activities are eligible, you can ask AusIndustry (who act on behalf of Innovation Australia) for advice by:
- phoning the AusIndustry contact centre on 13 28 46
- visiting business.gov.au
If you need more information about whether the expenditure you are claiming is eligible for the R&D tax incentive, you can: