About this guide
Before you can claim a notional deduction, and therefore the research and development (R&D) tax incentive, you must satisfy the rules about:
- whether you are an eligible R&D entity
- who R&D activities are conducted for.
This guide will help you work out whether you are an eligible R&D entity, and when R&D activities are conducted for you (or another relevant entity).
When we say 'you' in this guide we are referring to an entity that is working out whether it is eligible to claim the R&D tax incentive.
See Research and development tax incentive for more information on other requirements that must met before claiming the R&D tax incentive.
Eligibility for R&D
You can only claim the R&D tax incentive if you are an R&D entity. You are an R&D entity if you are a corporation that is any of the following:
- incorporated under an Australian law
- incorporated under a foreign law but you are an Australian resident for income tax purposes
- incorporated under a foreign law and you are both
- a resident of a country with which Australia has a double tax agreement, with a definition of 'permanent establishment'
- carrying on business in Australia through a permanent establishment as defined in the double tax agreement.
You are not eligible for the R&D tax incentive if you are:
- an individual
- a corporate limited partnership
- an exempt entity (where your entire income is exempt from income tax).
Trusts are not generally R&D entities, except a body corporate in the capacity of trustee for a public trading trust.
There are special rules to consider if you are a member of a consolidated group or multiple entry consolidated (MEC) group or a partner in a R&D partnership.
For the definition of:
- 'R&D entity', refer to section 355-35 of the Income Tax Assessment Act 1997 (ITAA 1997)
- 'Australian law', 'foreign law' and 'Australian resident', refer to section 995-1 of the ITAA 1997.
See also
- TR 2018/5 - Income tax: central management and control test of residency
- Permanent establishments