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Article | 4-minute read

The R&D tax incentive

Business planning

The R&D tax incentive is a government program for small businesses undertaking research and development. Many Australian businesses don’t realise that they are already doing research and development. We have put together some information to help you understand what the R&D tax incentive is and if you might be eligible.

What is the R&D tax incentive?

The Australian government provides a safety buffer for small businesses taking a financial risk in trying to create something new or improve something existing.

The program helps a wide range of businesses across different industries including manufacturing, agriculture, retail, professional services, fashion, science, online or technology.

A surprising amount of businesses in Australia are doing research and development, they just don’t realise it.

Take some time to understand exactly what the R&D tax incentive is.

First, consider if you're doing R&D

It’s generally accepted that you’re doing research and development if you’re experimenting with different solutions to solve a previously unsolved problem.

Examples vary from industry to industry, but may include:

  • tech start-ups building new web or mobile applications
  • fashion designers designing a new material
  • farmers improving their automated irrigation systems
  • a new coffee blend which combines several beans and uses a multi-stage roast process to achieve a specific pH and a different taste
  • vegan cakes (i.e. animal and dairy free) which maintain their taste profile after freezing and are capable of being manufactured at scale
  • a process that combines several systems to automate manufacturing steps resulting in increased throughput
  • increasing the capacity, efficiency and diversity of food manufacturers’ production lines by trialling new production layouts and machinery
  • a software application that enables customers to determine the required type of light fittings based on room dimensions and desired lighting level
  • automating responses to customer reviews and product ratings across online channels

Is your business actually researching and developing?

How do I know if I'm eligible?

You’re likely to qualify if your business is:

  • a company that is liable to pay income tax in Australia
  • conducting at least one activity that meets the definition of a core R&D activity

Your business will also need to have spent over $20,000 on eligible expenses in the last financial year and improved an existing (or built a new) product, process or service.

Make sure you check whether or not your business is eligible – the extra funds will prove handy if your claim is approved.

How do I apply?

The program is run by both AusIndustry (on behalf of Innovation Australia) and the Australian Taxation Office (ATO).

In order to submit a claim, you need to submit:

  • an application form to AusIndustry
  • a Tax Incentive Schedule (TIS) to the ATO

You can start submitting claims as soon as the financial year ends (July 1st) through to midnight on April 30th.


How long does it take to assess my claim?

Typically the Australian Taxation Office ATO will take 3-6 weeks to process a claim after it is lodged.

Keep in mind that the ATO will have a backlog as we get closer to the April lodgment deadline.


Next steps


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