Research and development tax incentive – amounts you can claim
The research and development (R&D) tax incentive provides a targeted tax offset to encourage certain companies (R&D entities) to conduct R&D activities that benefit Australia.
It provides generous benefits for companies performing eligible R&D activities and has the following two core components:
- a 43.5% refundable tax offset for eligible entities with an aggregated turnover of less than $20 million - unless they are controlled by tax exempt entities
- a 38.5% non-refundable tax offset for all other eligible entities.
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.
It replaces the R&D tax concession and is jointly administered by Innovation Australia (assisted by AusIndustry) and the ATO.
Under the R&D tax incentive, an amount you can claim is called a 'notional deduction'. This guide explains the notional deductions you can claim under the R&D tax incentive, including:
When we say 'you' in this guide we are referring to a company that meets the definition of an R&D entity. Further information on R&D entities is available from Eligible entities.
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Amounts incurred on your R&D activities must be claimed under the R&D tax incentive. Unlike the R&D tax concession, where you could choose to claim an amount under another deduction provision rather than section 73BExternal Link of the ITAA 1936, if an amount meets the eligibility requirements of the R&D tax incentive under Division 355External Link of the ITAA 1997, it must be claimed under that Division. If you choose not to claim it under the R&D tax incentive, you cannot claim it elsewhere in your tax return. For further information on this restriction, refer to section 355-715External Link of the ITAA 1997.
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