Aims of the R&D program
The R&D tax incentive is a tax offset that aims to boost competitiveness and improve productivity across the Australian economy by:
- encouraging industry to conduct R&D that may not otherwise have been conducted
- improving the incentive for smaller firms to undertake R&D
- providing business with more predictable, less complex support.
Program administration
The ATO and the Department of Industry, Science and Resources (DISR) jointly administer the R&D tax incentive. Your R&D activities must be registered with DISR before claiming the tax offset.
We're responsible for:
- checking you are entitled to offsets for R&D expenditure you claim in your tax return
- paying or applying the offsets.
The R&DTI program is a self-assessment regime. Receiving a registration number from DISR means the application has been received and is complete. It doesn't mean the R&D activities meet the eligibility requirements. R&D entities may subject to compliance action by DISR or the ATO before or after they receive the offset.
Changes since 1 July 2021
The following changes to the R&D tax incentive have been made and applied to income years starting from 1 July 2021:
- The refundable offset rate of 43.5% was replaced with a rate of 18.5% above the company’s tax rate.
- The flat non-refundable rate of 38.5% was replaced with a progressive marginal tiered R&D intensity threshold. Increasing rates of benefit apply for incremental research and development expenditure by intensity, as follows
- 0 to 2% intensity: an 8.5% premium to the company’s tax rate
- greater than 2% intensity: a 16.5% premium to the company’s tax rate.
- The expenditure threshold increased from $100 million to $150 million. For notional deductions above $150 million, the R&D tax incentive offset rate is the corporate tax rate (the R&D premium doesn't apply).
- A uniform clawback rule was introduced for feedstock, R&D recoupments and assessable balancing adjustments and a catch-up rule for deductible balancing adjustments.
- The general anti-avoidance provisions of Part IVA of the Income Tax Assessment Act 1936 now includes an R&D tax incentive offset as a tax benefit from 1 July 2021.
- We are now required to publish a company’s claimed R&D expenditure, with the first publication to be 2 years after the end of the financial year, and as soon as practicable after 1 July 2024.
Anti-avoidance rules
From 1 July 2021, the general anti-avoidance rule of Part IVA of the Income Tax Assessment Act 1936 includes R&D tax incentive offsets as a tax benefit for Part IVA.
A tax benefit arising out of on R&D claim may be summarised as follows:
- The R&D entity entered into a scheme to access the R&D tax offset.
- A tax benefit is received in connection with the scheme.
- The dominant purpose of the R&D entity entering into the scheme is to either:
- enable it to get the R&D tax offset
- get a refundable R&D tax offset where it would have or reasonably be expected to have obtained a non-refundable R&D tax offset.
If Part IVA applies to an arrangement, the tax benefits obtained from the arrangement can be cancelled.
Publishing a company's R&D expenditure
We are required to publish R&D expenditure claimed by an R&D entity 2 years after the end of the financial year.
Publishing this information will improve public accountability for R&D claimants and encourage voluntary compliance with the R&D program.
See R&D tax transparency reports for more information.
The R&D charter
The R&D tax incentive program charterExternal Link, which we jointly developed with DISR, clearly explains:
- the roles of DISR and the ATO in the context of the R&DTI program
- what you can expect when you interact with us
- what we ask from you.
The joint charter also details the options available to you if you are unsatisfied with your interactions with us.
When you deal with us, however, your interactions will be guided by our own Charter. Our Charter:
- explains what you can expect when you interact with us
- applies to everyone who works with us
- is based on laws, codes and principles we both must follow.