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About the R&D program

See how the research and development (R&D) program works and recent changes from 1 July 2021.

Last updated 21 November 2022

See how the research and development (R&D) program works and recent changes from 1 July 2021.

Aims of the R&D program

The research and development (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 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 information we publish from the forms lodged with us includes:

  • the name of the R&D entity
  • Australian business number (ABN) or Australian company number (ACN)
  • notional deductions claimed (less any feedstock adjustments).