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Helping you get R&D claims right

Our areas of concern and advice to avoid making an incorrect R&D tax incentive claim.

Last updated 13 May 2026

Joint administration

We and the Department of Industry, Science and Research (DISR) jointly administer the R&D tax incentive (R&DTI) as follows:

  • DISR administers registration and compliance of R&D activities
  • we are responsible for administering matters relating to the R&D tax incentive tax offsets, including ensuring the correct expenditure is claimed on eligible R&D activities.

The R&D tax incentive is a self-assessment program, which means the responsibility for compliance rests with the taxpayer.

We and DISR undertake complementary risk assessment and compliance work.

DISR 's compliance work focuses on the eligibility of R&D activities, while our compliance work focuses on the tax offsets allowable in respect of those activities.

We and DISR have identified a number of common registration errors and areas of concern and that you should consider when registering and claiming.

Common registration errors

DISR has identified the following common errors made during registration. To avoid delays in processing your application, check the following items in your application.

Incorrect income year

Check you are applying for the correct income year. The income year needs to match the income period on the company’s tax return submitted to us. You can't amend this by a variation.

Incorrect entity

Make sure the correct entity is applying. Only the head company of a consolidated or multiple entry consolidated group can apply to register R&D activities. The head company must register R&D activities performed by any member of the group. You can't amend this by a variation.

Wrong primary contact

The primary contact must be a company representative with their correct email address. Do not provide the email for a tax agent or other adviser.

You can provide contact details for tax agents elsewhere in the application form.

Variations

If you need to make any amendments after submission, you must complete a variationExternal Link. This will delay your registration.

Getting help

If you have any concerns about your R&D registration, contact DISR by:

Avoid delays

To avoid delays in processing your company tax return and R&DTI schedule with us, check that:

  • the DISR – IISA number is correct on the R&DTI schedule and corresponds to the income year of the return
  • label D – preliminary calculation on the R&DTI schedule is correct and matches item 7 label D on the company tax return
  • Part D – reporting entity annual turnover has been correctly calculated and placed under the correct label on the R&DTI schedule. Remember, you must include the annual turnovers of connected and affiliated entities in the calculation of aggregate turnover of the reporting entity.
  • Part E label R tax rate is correct.

Areas of concern

Our areas of concern include:

  • Ordinary business activities vs eligible R&D activities
  • Apportionment of overheads
  • R&D activities delivered by associated entities
  • Expenditure that isn't at risk
  • R&D activities conducted overseas by related foreign entities
  • Record keeping
  • Concerning practices
  • Fraud.

Ordinary business activities vs eligible R&D activities

We and DISR have observed issues with R&DTI claims that include expenditure relating to ordinary business activities and are not eligible R&D activities. This includes where:

  • no R&D activities have been undertaken
  • the registered activities include a mixture of eligible R&D activities and ineligible ordinary business activities
  • the R&D activities being carried out have transitioned into ordinary business activities
  • the R&D activities are not concerned with the generation of new knowledge
  • the R&D activities do not involve the application of the scientific method (proving or disproving a hypothesis through experiments)
  • the R&D activities address commercial being rather than technical risks.

For more information, see TA 2017/3 Claiming the Research and Development Tax Incentive for ordinary business activities.

Apportionment of overheads

Apportionment methodologies may be used in some instances, but the company can only claim notional deductions under the R&DTI to the extent that the expenditure has been incurred on eligible R&D activities. For example, it may be appropriate to use R&D salary over total staff to apportion personnel costs, but not for utilities.

It is commonly observed that the apportionment methodologies used by claimants can result in an unreasonable apportionment of overhead expenses to R&D activities over non-R&D activities.

The company must use a reasonable basis of apportionment. It must reflect the extent to which the expenditure has been incurred on R&D activities if there is no single apportionment method that can be used to apportion expenditure between R&D and ordinary business activities on a fair and reasonable basis.

The appropriate methodology to apportion an expense depends on the nature of the expense. The company should document the methodology adopted and the rationale for that methodology.

R&D activities delivered by associated entities

We have observed claims that incorrectly include notional deductions in relation to R&D activities delivered by associated entities, where the amount has not been incurred or paid. Notional deductions can only be claimed in relation to expenditure incurred to associates of the company where the amount has also been paid.

We have also seen incorrect claims where the R&D activities are not conducted for the claimant, but in substances are conducted for (or to a significant extent) for the associated entity.

For more information see R&D expenditure incurred to associates and Taxpayer Alert TA 2023/4 R&D activities delivered by associated entities.

Expenditure that isn't at risk

You can't claim expenditure that isn't at risk. For example, if there is a guaranteed return (under a financing arrangement) on your expenditure, or an indemnity covers it, it isn't at risk and you can't claim it.

Expenditure isn't at risk if when it is incurred if you or your associate can reasonably expect to receive an amount of consideration:

  • as a result of the expenditure being incurred
  • irrespective of the results of the related activities.

For more information, see Taxation Ruling TR 2021/5 Income tax: research and development tax offsets – the 'at risk' rule.

R&D activities conducted overseas by related foreign entities

We have identified incorrect R&DTI claims where Australian companies have claimed the tax offset for expenditure incurred on R&D activities conducted overseas by foreign related entities. An Australian company can't claim for expenditure incurred on overseas R&D activities if they weren't conducted for them (and instead conducted for the foreign related entity).

Note that if the R&D activities are conducted for the Australian company, the offset can't be claimed for expenditure that is not at risk.

For more information, see Taxpayer Alert TA 2023/5 R&D activities conducted overseas by foreign related entities.

Record keeping

It is a requirement that companies maintain contemporaneous records to support their R&D claims. This view is supported by AAT Cases (Tier Toys Limited v FC of T [2014] AATA 156 and Ozone Manufacturing Pty Ltd v FC of T [2013] AATA 420). In these cases, contemporaneous records were not maintained so the taxpayer could not demonstrate that the expenditure was anything more than normal business expenses.

The taxpayer’s business records must be sufficient to verify the:

  • amount of the expenditure incurred on R&D activities
  • nature of the R&D activities
  • relationship of the expenditure to the activities.

Self-assessment requires evidence that substantiates that each and every part of the legislative requirements are met. A taxpayer can't succeed in establishing those requirements in the absence of detailed documentation recording the process of each activity as it develops.

The taxpayer has the responsibility to ensure that reasonable methods have been used to differentiate between expenditure on eligible R&D activities and other activities.

Documents created after the fact will generally not be adequate on their own without some contemporaneous records (that is, records of activities at the time they were conducted).

For more information see:

Concerning practices

Registered tax agents and advisors have an important role to play in providing R&D advice to taxpayers. However, we have concerns with some of the advice being promoted.

Concerning practices include:

  • cold calling taxpayers and advising them that their business activities are eligible R&D activities
  • using late registrations to amend claims to access the R&D refundable offset to provide funding for companies in financial difficulties
  • charging excessive commissions that are a large percent of the refundable R&D tax offset
  • advising companies to make incorrect R&D tax incentive claims. They may be referred to the Tax Practitioners Board to consider whether there has been a breach of the Tax Agent Services Act 2009.

Promoter penalty laws may apply under Division 290 of Schedule 1 to the Taxation Administration Act 1953 for promoters of schemes to access the R&D tax incentive for ineligible activities.

Fraud

While most taxpayers and advisers generally do the right thing, we and DISR are working closely to identify those who may be involved in aggressive R&D arrangements. We are taking a coordinated approach to address these behaviours to ensure the integrity of the R&DTI program.

These arrangements:

  • are inconsistent with the requirements of the R&D regime
  • may have a feature of tax avoidance
  • may be fraudulent.

For further information about compliance work, refer to Joint administration and Help to self-assess my eligibility and register my activitiesExternal Link.

Concerns in specific industries

In the past we have issued taxpayer alerts regarding certain industries. We have also identified some companies in particular industries having issues, including:

  • Agriculture
  • Building and construction
  • Mining
  • Software development.

Agriculture

We and DISR have observed the following issues with R&DTI claims made in agricultural industries:

  • No R&D activities are being conducted.
  • The activities form part of, or all of, the entity's ordinary business activities.
  • The activities involve the application of established products and existing methodologies where a competent professional could have worked out the outcome without conducting an experiment.
  • The activities address a commercial rather than a technical risk.
  • The scale of R&D activities is disproportionate with the scale of any data collection, observation and evaluation.
  • The method employed to apportion overhead expenses allocates an unreasonably large amount to R&D.
  • It is uncertain whether the activities are being conducted by the company on its own behalf or for the entity carrying on the agricultural business.
  • It is uncertain whether amounts billed to related parties are paid.

For more information see:

Building and construction

We and DISR have observed the following issues with R&DTI claims made in the building and construction industries:

  • Whole of project claims where the technical uncertainty is resolved by applying existing knowledge.
  • Activities involving untested or novel elements where in effect they relate to fulfilling the building and construction contract.
  • Expenditure that is subject to the building exclusion.
  • Advisers encouraging clients to make ineligible claims on the basis that their activity is unique.

For more information, see TA 2017/2 Claiming the Research and Development Tax Incentive for construction activities.

Mining

We and DISR have observed the following issues with R&DTI claims made in the mining industry:

  • The scope of the R&D activities in the context of extracting minerals is not clearly identified. Activities in R&D projects are too broad and there is an increased risk of over-claim of costs.
  • Activities relating to modelling of mines are not R&D unless they are associated with a physical experiment. A feasibility study does not necessarily mean that R&D has or will occur.
  • Claimants need to use simple terminology to explain the technical challenges and how they overcome them.
  • Exploration activities are specifically excluded from being a core R&D activity.

Software development

We and DISR have observed the following issues with R&DTI claims made in the information technology and software development industries:

  • R&D claims are made on whole of project basis. They are not considering each of the activities and applying the relevant legislation to determine which activities are R&D activities.
  • Software experiments are not clearly articulated in the R&D registration forms.
  • Technical uncertainties are not clearly identified.
  • Expenditure is incurred in acquiring, or acquiring the right to use, technology that can't be claimed as a notional deduction.
  • Expenditure is being apportioned between R&D activities and ineligible activities in an unreasonable manner.

For more information see:

  • Guidance materialExternal Link to clarify the eligibility of software development activities under the R&D tax incentive
  • TA 2017/5 Claiming the Research and Development Tax Incentive for software development activities.

Incorrectly claiming the wine grapes levy

We and DISR are warning about a scheme involving incorrectly claiming the wine grapes levy as R&D expenditure.

The levy is paid by wine producers to the Department of Agriculture, Fisheries and Forestry. It is calculated on the total number of tonnes of grapes used by the wine producer in a year.

Some promoters are incorrectly advocating that companies who pay the compulsory wine grapes levy can register the activity with DISR or simply claim the levy, as all or part of a notional deduction in calculating their entitlement to the R&D tax incentive.

The levy is applied to fund the marketing, and research and development programs undertaken by the Australian Grape and Wine Authority (Wine Australia). Wine Australia is not a registered research service provider (RSP) nor a Cooperative Research Centre under the R&D tax incentive program.

What are our concerns

We and DISR are concerned that some wine producers have been misled into thinking they are able to include the levy as eligible R&D expenditure which has been incurred on registered R&D activities.

The levy can usually be claimed by a wine producer as an ordinary business deduction against the wine producer’s assessable income. However, the way R&D commissioned by Wine Australia is conducted, means that the levy can't be claimed in calculating a refundable or non-refundable R&D tax offset for the wine producer.

Levies paid to industry organisations can only be claimed in calculating an R&D tax offset if the industry organisation is a Levy Collecting RSP. Wine Australia is not a Levy Collecting RSP.

Generally, eligible R&D expenditure can only be claimed on R&D activities which are registered by the claimant with DISR. If the R&D activity is carried on for the claimant by a third party, the claimant also needs to be able to show that:

  • it has effective ownership of the know-how, intellectual property, or other results arising from the R&D expenditure
  • it has appropriate control over the conduct of the R&D activities
  • it bears the financial burden of carrying out the R&D activities
  • the R&D activity is not carried out to a significant extent for another entity, or entities.

It follows that although a company that produces wine may have registered R&D activities with DISR, the company’s expenditure on the levy bears no connection with the R&D activities it carries on.

In addition, the funds provided through the levy are used by Wine Australia to invest in R&D activities undertaken by research bodies based on the R&D provider’s own project proposals and are conducted at the direction of Wine Australia. The know-how and intellectual property arising from the R&D activities is retained by the entities investing in the R&D, and as is the case with the financial risk, the results are broadly shared.

Finally, the R&D activities commissioned by Wine Australia are carried on for the benefit of the broader grape and wine industry, not just for individual companies that pay the levy.

We also note that many of the activities carried on by Wine Australia which are funded by levies, such as marketing and promotion, are expressly excluded from the definition of R&D activities and therefore related expenditure cannot be included in a claim.

What you should do

You should consider whether our concerns are applicable to your circumstances.

We are committed to maintaining the integrity of the R&D program. We deal firmly with those deliberately attempting to exploit the program but can help taxpayers who have unintentionally landed in an unlawful scheme.

If you think our concerns might be applicable , you can:

Penalties can apply if you have incorrectly claimed the R&DTI. They will be significantly reduced if you make a voluntary disclosure. Generally, the reduction in penalties is greater if you make a voluntary disclosure before we notify you of an examination of your tax affairs.

Registered tax agents who advise or encourage companies to make incorrect R&D claims may be referred to the Tax Practitioners Board to consider whether they have breached the Tax Agent Services Act 2009. Promoter penalty laws may also apply to the promoters of schemes designed to inappropriately access the R&DTI.

To provide information about this or another arrangement, or about a promoter, you can:

For more information, see Check if you're eligible for the R&D tax incentiveExternal Link.

Further help and advice from us and DISR

We suggest you use our Checklist for claiming the R&D tax incentive.

You can get further help and advice about the R&DTI from us and DISRExternal Link. The type of help and advice you receive will depend on:

  • your specific needs and circumstances
  • whether you want an answer in writing.

We and DISR administer the R&DTI jointly. You should seek help or advice from the agency that administers the aspect of the program that relates to your query.

DISR manages the registration of your R&D activities and checks the comply with the lawExternal Link. They provide public guidance and advance findingsExternal Link about the program so that R&D entities are better informed about their entitlements and obligations. Their findings set out how their decisions apply to you and your specific circumstances.

We determine whether or not the R&D tax offset and expenditure you are claiming for your R&D activities is eligible. We offer different types of advice and guidance that give our view on how the laws we administer apply. These range from published guidance about how the law applies generally, to advice given to a taxpayer about how the law applies to their particular circumstances.

They include:

  • private rulings, which set out our opinion about the way a tax law applies to you in specific circumstances
  • public rulings, which deal with priority issues that require clarifying and include product rulings (which are intended to provide certainty to participants about an arrangement)
  • class rulings, which are intended to minimise the need for a group of participants to individually seek private rulings in relation to the same scheme.

For more information see our:

 

R&D expenditure incurred to an associate

How the research and development tax incentive applies to expenditure you incur to an associate.

Checklist for claiming R&D tax incentive

Use our checklist to make sure you claim the R&D tax incentive correctly.

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