R&D Tax Incentive — eligibility, registration and offset rates

Joint administration model

The R&D Tax Incentive is jointly administered by AusIndustry (Department of Industry, Science and Resources) and the Australian Taxation Office (ATO). This shared responsibility means different aspects of the process are managed by each agency.

AusIndustry is responsible for the registration of R&D activities. Companies must register their activities with AusIndustry before claiming the tax offset.

The ATO manages the tax offset claim itself, which is lodged through the company tax return. Only Australian companies (not individuals, trusts or partnerships) are eligible to claim the incentive.

Offset rates for FY2025-26 and FY2026-27

Companies with aggregated turnover below $20 million are eligible for a refundable tax offset of 43.5%. A minimum annual R&D expenditure of $20,000 is required to claim the incentive.

Companies with aggregated turnover of $20 million or more are eligible for a non-refundable offset. The offset rate for these companies ranges from 8.5% to 16.5%, determined by their R&D intensity.

The offset rates described above will continue to apply for the financial years FY2025-26 and FY2026-27.

Eligible activities and eligible expenditure

Activities must meet specific criteria to be eligible for the R&D Tax Incentive. These activities must involve genuine technical uncertainty and systematic investigation. Software development may qualify as eligible if it results in the generation of new knowledge. However, expenditure related to excluded core technology is not deductible.

Eligible expenditure includes a range of costs directly related to registered R&D activities. This includes employee wages for time spent on R&D, payments to contractors, cloud hosting and software expenses, materials and consumables, depreciation on assets used in R&D, and apportioned overheads.

Crucially, all expenditure claimed under the R&D Tax Incentive must relate to activities that have been registered with AusIndustry. Without this registration, the associated expenditure cannot be considered eligible.

Registration deadlines and 2026-27 Budget reforms

Registration for the R&D Tax Incentive requires submission to AusIndustry within 10 months after the end of the income year. For income years ending 30 June 2026 (FY2025-26), the registration deadline is 30 April 2027.

Significant reforms to the R&D Tax Incentive are scheduled to take effect from 1 July 2028. These changes are a result of the 2026-27 Budget.

From 1 July 2028, companies with aggregated turnover above $50 million will have their R&D intensity threshold lowered to 1.5%. Additionally, access to refundable offsets will be restricted to companies under 10 years old and below $50 million aggregated turnover.