All About R&D Tax Incentive

The R&D tax incentive is a program administered by the Australian Taxation Office (ATO). It encourages businesses to invest in research and development (R&D) activities. The incentive provides a tax offset of eligible R&D expenditure.

To be eligible for the R&D tax incentive, your business must:

  • Carry on an eligible R&D activity
  • Expend money on an eligible R&D activity
  • Meet the eligibility criteria for the incentive

Eligible R&D activities include: 

  1. Researching or developing a new product, process, or service
  2. Developing or testing a new prototype
  3. Developing an improvement to an existing product, process, or service that is likely to result in a significant contribution to:
  4. The effectiveness of the product, process, or service 
  5. How it is manufactured 
  6. How it is used 
  7. Its marketability 
  8. Its commercial viability

What Are Ineligible R&D Activities?  

A business may not claim the R&D tax incentive for expenditure on:

  • Basic research, which is defined as research in the natural sciences and mathematics
  • Theoretical research, which is defined as research that does not involve making a physical or functional change to anything
  • Market research, surveys, and commercial analysis
  • Quality control and assurance activities
  • Human resources or employment costs
  • Finance and insurance costs
  • Patent application or registration costs
  • Costs of goods or services that are acquired from another entity for the purpose of conducting R&D

What Tax Offset Does the R&D Tax Incentive Offer?

The R&D tax incentive offers a tax offset for eligible entities. This means that your business can claim a reduction in the amount of income tax it pays on its taxable income. The tax offset is available for both incorporated and unincorporated businesses.

The R&D tax incentive is claimed by completing an Australian Business Number (ABN) registration application on the ATO’s website. The amount of offset that your business qualifies for is based on how much it spends on eligible R&D activities. 

From the 1st of July 2021, if you have an R&D business with a turnover of less than $20 million, you can claim a tax offset for an amount equal to 18.5 percent of that entity’s eligible R&D expenditure.

For businesses with a turnover of $20 million or more, the tax offset will be claimed on a sliding scale basis, as determined by the ATO. 

Take Advantage of the R&D Tax Incentive

The R&D Tax Incentive is a valuable tool that can help your business reduce its taxable income and pay less tax. It’s important to understand the eligibility criteria and how to claim the offset so you can take advantage of this program. If you’re unsure if your business is eligible, talk to an accountant or the ATO.

This tax incentive has a whole range of benefits. You can reduce your taxable income, get a cash rebate and even improve your innovation. This incentive is key for businesses that want to expand their R&D capabilities. Make sure you take advantage of it!

The R&D tax incentive is an excellent way to reduce your business’s taxable income. If you’re unsure whether your business qualifies for the R&D tax incentive, talk to professional tax agents. 

If you would want to enjoy the R&D Tax Incentive, you would need to make sure that your business is eligible. At Accurate Business & Accounting Services, we can help you in the assessment of your eligibility for this program. 

We are experienced accountants, bookkeepers & business advisers who offer a range of services to ensure that your business is achieving the maximum possible success. We can also help you in claiming R&D tax incentive rebates and maximize your benefits.

Check latest R&D Tax Inventive on business.gov.au

For more information about the R&D Tax Incentive, contact us or visit our website.