R&D tax incentive core components
The R&D tax incentive has the following core components:
- For eligible entities with an aggregated turnover of less than $20 million, a refundable tax offset applies, unless they are controlled by one or more tax exempt entities. The offset is equal to your corporate tax rate plus an additional premium rate of 18.5%.
- For all other eligible entities, a non-refundable tax offset applies. The offset is equal to your corporate tax rate plus a premium rate based on the level of incremental R&D intensity (the R&D expenditure as a proportion of total expenses). The premium rate is either 8.5% (0-2% intensity) or 16.5% (greater than 2% intensity). An R&D entity's 'intensity' is determined as its notional R&D expenditure as a proportion of total expenditure for the income year.
- If your notional R&D deductions exceed $150 million for an income year, the rate of the R&D tax offset is reduced to the company tax rate for the portion over $150 million.
Part E helps you work out:
- which offset you're entitled to
- the amount of R&D tax offset you claim at item 21 Research and development tax incentive in the Company tax return 2026.
For more information, see Refundable and non-refundable offsets.
1 Additional information
Write your corporate tax rate at item 1 Tax rate – label R. This will be either:
- 25% if you're a base rate entity
- 30% for all other companies.
2 Refundable R&D tax offset
If you answered No to Part D items 1 and 2 and your notional deductions calculated under Part A item 11 – label Z total $20,000 or more, you can claim the refundable R&D tax offset.
If your notional deductions calculated under Part A item 11 – label Z total less than $20,000, then you're only entitled to a tax offset for notional deductions in relation to expenditure under both:
- Part A items 1A and 1B R&D expenditure – Research service provider (RSP)
- Part A items 9Q and 9R Cooperative Research Centre (CRC) contributions.
Work out your refundable R&D tax offset
Step 1: Determine the amount to show at label Z1
Write at Z1 Total notional R&D deductions the amount you show in Part A item 11 Total notional R&D deductions – label Z.
Step 2: Calculate your initial offset amount
If the amount at label Z1 is:
- $150 million or less, multiply the amount at label Z1 by your corporate tax rate plus 18.5% – this is your offset amount
- greater than $150 million
- multiply $150 million by your corporate tax rate plus 18.5%
- multiply the excess over $150 million by your corporate tax rate
- the total of these 2 amounts is your offset amount.
Write your refundable tax offset at item 2 Refundable R&D tax offset – label U. Transfer this amount to the Company tax return 2026 at item 21 Refundable R&D tax offset – label U.
You don't need to complete item 3.
Item 3 Non-refundable R&D tax offset
If you answered Yes to Part D item 1 or item 2 and your notional deductions calculated under Part A item 11 – label Z total $20,000 or more, you can only claim the non-refundable R&D tax offset.
If your notional deductions calculated under Part A item 11 – label Z total less than $20,000, you're only entitled to a tax offset for notional deductions for expenditure under:
- Part A items 1A and 1B R&D expenditure – Research service provider (RSP)
- Part A items 9Q and 9R Cooperative Research Centre (CRC) contributions.
Write at Z2 Total notional R&D deductions the amount shown at Part A item 11 – label Z.
Work out the non-refundable R&D tax offset
Step 1: Work out the R&D entity total expenses
- start with the amount you show in the Company tax return 2026 at item 6 Total expenses – label Q, subtract any amount that was already included at item 6 – label Q in a prior year
- subtract the amount you show in the Company tax return 2026 at item 7 Accounting expenditure in item 6 subject to R&D tax incentive – label D
- add the amount you show at Part A item 11 Total notional R&D deductions (X plus Y) – label Z in this Research and development tax incentive schedule 2026, subtract any amount that was included at item 11 – label Z in a prior year.
Write this amount at item 3 R&D entity total expenses – label V.
Step 2: Determine your label Z2 amount
If your item Z2 Total notional R&D deductions are:
- less than or equal to $150 million, Z2 is your step 2 amount
- greater than $150 million
- $150 million is your step 2 amount
- your notional deductions amount subtract $150 million is your C1 amount.
Step 3: Work out the amount to show at item 3 R&D intensity – label W
- Divide your step 2 amount by your step 1 amount to 4 decimal places.
- Multiply the result by 100 – to express it as a percentage to 2 decimal places.
- Write the percentage at item 3 R&D intensity – label W.
Step 4: Populate the notional deductions applied column A1 and B1
If your step 3 percentage is 2% or less, show your step 2 amount at A1.
If your step 3 percentage is greater than 2%:
- at A1, write your R&D entity total expenses multiplied by 2%
- at B1, write your step 2 amount minus the amount at A1.
Step 5: Working out A2, B2 and C2
- To work out A2, multiply A1 by the total of item 1 Tax rate – label R plus 8.5%.
- To work out B2 if you have an amount at B1, multiply B1 by the total of item 1 Tax rate – label R plus 16.5%.
- To work out C2 if you have an amount at C1, multiply C1 by item 1 Tax rate – label R.
Step 6: Add up the amounts at A2, B2 and C2
Write the total at item 3 Non-refundable R&D tax offset – label A.
Write your non-refundable tax offset at item 3 Non-refundable R&D tax offset – label A. Transfer this amount to the Company tax return 2026 at item 21 Non-refundable R&D tax offset – label A.
Continue to: Taxpayer's declaration and lodgment