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About the R&D program

Read about the research and development (R&D) program, compliance measures and the charter.

Last updated 21 May 2024

The R&D program

The R&D tax incentive program is the Australian Government's most significant lever for funding innovation and R&D. It plays a pivotal role in shaping the nation's economic future and bolstering Australia's global competitiveness. The program encourages companies of all sizes to undertake R&D activities they might not otherwise.

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 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.

Aims of the R&D program

The R&D tax incentive 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.

Changes since 1 July 2021

The following changes were announced in 2020 to the R&D tax incentive that apply for income years commencing on or after 1 July 2021:

  • The refundable offset rate of 43.5% has been replaced with an offset rate of 18.5% above the company’s tax rate.
  • The flat non-refundable rate of 38.5% has been replaced with a progressive marginal tiered R&D intensity threshold. Increasing rates of benefit apply for incremental research and development expenditure by intensity:  
    • 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 has increased from $100 million to $150 million. For notional deductions above $150 million, the R&D tax offset rate is the corporate tax rate. The R&D premium does not apply.
  • The feedstock, clawback and adjustment provisions have been replaced with an exact amount rather than an approximation.
  • The general anti-avoidance provisions of Part IVA of the Income Tax Assessment Act 1936 includes an R&D tax offset as a tax benefit from 1 July 2021.
  • The ATO is required to publish a company’s claimed R&D expenditure. The first publication is to be made 2 years after the end of the financial year, and as soon as practicable after 1 July 2024.

Anti-avoidance rules

The general anti-avoidance rule of Part IVA of the Income Tax Assessment Act 1936 now includes R&D tax offsets as a tax benefit for Part IVA from 1 July 2021.

A tax benefit arising out of on R&D claim may be summarised as:

  • 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. The first publication of the R&D tax transparency reports will be as soon as practicable after 1 July 2024 for the income year ending 30 June 2022.

Publishing this information will improve public accountability for R&D claimants and encourage voluntary compliance with the R&D program.

The R&D charter

We have jointly developed the R&D tax incentive program charterExternal Link along with DISR to clearly explain:

  • 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.