What is the research and development tax incentive in Australia 2026?
The Research and Development (R&D) Tax Incentive in Australia for 2026 provides tax offsets to eligible companies conducting R&D activities, encouraging innovation and investment. It includes refundable and non-refundable components based on turnover.
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How it works in practice
What is the R&D Tax Incentive?
The Research and Development (R&D) Tax Incentive is a Australian government program that provides tax offsets to companies conducting eligible R&D activities. Its primary goal is to encourage businesses to innovate and invest in R&D in Australia by reducing their tax burden. The incentive is jointly administered by the Australian Taxation Office (ATO) and AusIndustry.
How it Works
The incentive has two main components: a refundable tax offset and a non-refundable tax offset. Businesses with an aggregated annual turnover of less than $20 million can access a refundable tax offset. This means that if the offset amount exceeds the tax payable, the company may receive the difference as a cash refund. For all other eligible companies, a non-refundable tax offset is available. The value of these offsets is linked to a company's corporate tax rate and its R&D intensity. To qualify, activities must involve experimentation and be conducted to generate new knowledge or create new or improved materials, products, processes, or services.
Important exceptions
To be eligible, R&D activities must be conducted in Australia (with limited exceptions).
The company must be an eligible entity, typically incorporated, and not tax-exempt.
The R&D activities must genuinely aim to resolve scientific or technical uncertainty, not just routine engineering or development.
Registration with AusIndustry is mandatory before claiming the offset in a tax return.
Only specific expenditures directly related to eligible R&D activities can be claimed.
What you should do now
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Determine if your company is an eligible entity (e.g., incorporated, not tax-exempt) and meets turnover thresholds for refundable or non-refundable offsets.
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Identify and document all eligible R&D activities, ensuring they involve scientific or technical uncertainty and aim to generate new knowledge.
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Track and document all eligible R&D expenditures, including salaries, contractor costs, and overheads directly related to the R&D activities.
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Register your R&D activities with AusIndustry online by the deadline, typically within 10 months after the end of your company's income year.
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Claim the R&D tax offset in your company's annual income tax return, submitting all required documentation to the ATO.
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