Rates of R&D tax incentive offset

The research and development (R&D) tax incentive provides targeted tax offsets designed to encourage more companies to engage in R&D. The incentive has 2 core components. For income years commencing on or after 1 July 2021, entities engaged in R&D may be entitled to:

• a refundable tax offset equal to the entity’s company tax rate plus an 18.5% premium for eligible entities with an aggregated turnover of less than $20 million per annum, provided they are not controlled by income tax-exempt entities
• a non-refundable tax offset for all other eligible entities equal to the entity’s company tax rate plus a two-tiered premium determined on the notional R&D expenditure as a proportion of total expenditure for the income year. The new rates will be the company tax rate plus
  • 8.5% for R&D expenditure up to 2% of total expenditure
  • 16.5% for R&D expenditure above 2% of total expenditure.

Entities may be able to carry forward unused offset amounts to future income years. To find out more, see Refundable and non-refundable tax offsets.

The rate of the R&D tax offset is reduced to the company tax rate for that portion of an entity's notional R&D deductions that exceeds $150 million for an income year. If you previously claimed a concession you can transition from the R&D concession to the R&D tax incentive

The ATO and AusIndustryExternal Link on behalf of the Department of Industry, Science and Resources jointly administer the R&D tax incentive. Your R&D activities must be registered with AusIndustry before claiming the tax offset.

We are responsible for payment or application of the R&D offset and ensuring that you are entitled to tax offsets for expenditure claimed in your tax return for your R&D activities.

For more information, see the Research and Development Tax IncentiveExternal Link guidance published on business.gov.au.