The Research and Development (R&D) tax incentive is a government program designed to encourage Australian businesses to invest in innovation. By providing tax offsets, the scheme supports companies that are undertaking eligible R&D activities aimed at generating new knowledge, improving products, or advancing technology. 

The incentive is a key driver for fostering growth, enhancing competitiveness, and reducing financial risk for companies engaged in R&D, especially for those in technology, manufacturing, and science sectors. Both small and large businesses can benefit from this scheme. This tax incentive plays a vital role in helping businesses remain innovative and competitive.

Benefits of the R&D Tax Incentive

Tax Offsets

Refundable Tax Offset: Small businesses (with less than $20 million turnover) can receive a refundable tax offset equal to their company tax rate plus an 18.5% premium.

Non-Refundable Tax Offset: For larger businesses, the non-refundable offset is based on R&D expenditure:

  • Company tax rate plus 8.5% for R&D expenditure up to 2% of total expenditure.
  • Company tax rate plus 16.5% for R&D expenditure above 2%.

Cash Flow Support

Smaller businesses benefit from the refundable offset, potentially receiving cash back, which can be reinvested in further innovation. 

Innovation Encouragement

By reducing the cost of R&D activities, businesses can explore innovative projects with less financial risk.

Long-Term Competitiveness

The incentive promotes continuous investment in new technologies, processes, and products, helping businesses stay competitive in their industry.

These benefits encourage businesses across various sectors to invest in research and development, ensuring sustainable growth and advancement.

Eligibility for the R&D Tax Incentive

To qualify for the R&D tax incentive, your business must satisfy the following conditions:

Be an Eligible R&D Entity

  • Incorporated in Australia under Australian law.
  • Incorporated under a foreign law, but an Australian tax resident.
  • Incorporated under a foreign law with a permanent establishment in Australia, as defined by a double tax agreement with another country.

Carry Out Eligible R&D Activities

The R&D activities must involve experimentation aimed at generating new knowledge, and they must meet the government’s criteria.

  • Core R&D Activities: These are experimental activities where the outcome is unknown and can only be determined through a systematic scientific approach. The goal is to generate new knowledge or improvements in products, processes, or services.
  • Supporting R&D Activities: These are activities directly related to core R&D or undertaken for the dominant purpose of supporting core R&D efforts. This may include activities linked to production or those excluded as core R&D activities.

Register Your Activities

Each R&D activity must be registered with AusIndustry before lodging a claim.

Meet Deduction Threshold

Your eligible R&D expenses (notional deductions) must be more than $20,000 for the financial year. However, if you have contracted a registered Research Service Provider (RSP), you can claim for expenditure under $20,000.

How Do I Get R&D Tax Incentives?

Register with AusIndustry

Before claiming, you must register your R&D activities with AusIndustry. Registration is required annually.

Lodge a Claim

Once registered, you can claim the R&D tax offset when filing your company’s tax return with the ATO. Make sure you maintain thorough documentation of all eligible activities and expenses.

Entities like individuals, corporate limited partnerships, exempt entities, or trusts (except public trading trusts) are not eligible.

Why Choose New Wave Accounting for Your R&D Tax Incentive?

The R&D tax incentive is a valuable opportunity for businesses to reduce the cost of innovation, providing tax offsets for eligible R&D activities. However, navigating the eligibility requirements, registration process, and ensuring compliance can be complex. 

That’s where we at New Wave Accounting come in. We specialise in helping businesses maximise their R&D tax claims by ensuring every step is handled accurately and efficiently. With our expertise, you can focus on innovation while we manage the paperwork, ensuring you claim every benefit you’re entitled to. 

Contact us to support your growth and take the stress out of the R&D tax process.