The research and development (R&D) tax incentive encourages companies to engage in R&D benefiting Australia. It does this by giving a tax offset for eligible R&D activities. It has two core components:
- a 43.5% refundable tax offset for eligible entities with an aggregated turnover of less than $20 million annually, if they aren't controlled by income tax exempt entities
- a 38.5% non-refundable tax offset for all other eligible entities (but they may be able to carry forward unused offset amounts to future income years).
The R&D tax incentive replaced the R&D tax concession from 1 July 2011.
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 exceed $100 million for an income year. This change applies to assessments for income years starting on or after 1 July 2014 and before 1 July 2024.
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.
- giving business more predictable and less complex support.
We, and the Department of Industry, Innovation and Science (on behalf of Innovation and Science Australia), jointly administer the R&D tax incentive:
- Your R&D activities must be registered with the Department of Industry, Innovation and Science before you can claim the tax offset.
- We look at whether the expenditure claimed in your tax return for your R&D activities is eligible for the tax offset.