The new financial year is the right time to think about the R&D Tax Incentive, not because anything is due right now, but because of when it isn’t due. The registration deadline for your 2025-26 R&D activities sits ten months away, on 30 April 2027, and that distance is exactly the problem. Ten months feels like a long way off, which is precisely why so many businesses leave their record-keeping until the deadline is close, only to discover the records they need don’t actually exist in a usable form.
If your business does anything that might qualify as research and development, building new software, developing a new product, testing an uncertain technical approach, or solving a problem where the outcome genuinely wasn’t known in advance, 1 July is the moment to set up the habits that determine whether your eventual claim is strong and defensible.
Why the deadline itself is the trap
To claim the R&D Tax Incentive, your R&D activities must be registered on the R&DTI customer portal within 10 months after the end of the relevant income year. For a standard 30 June balancer, that means 30 April the following year, and the deadline is absolute.
It should be noted that there is no goodwill exception for a business that genuinely did eligible R&D work but registered it late. Missing the deadline means no claim for that income year.
Most businesses that miss out on the R&D Tax Incentive don’t miss it because they forgot the date. They miss it or forgo eligible expenditure because, by the time April arrives, the evidence simply isn’t there in the form AusIndustry and the ATO require.
Why records created at tax time don’t hold up
This is the part that catches businesses out most often, and it’s worth understanding clearly rather than discovering it the hard way. It’s crucial to keep detailed records of the R&D activities and expenditures you want to claim from the time they were carried out. These records must demonstrate the nature of the activities, the costs involved, and how the expenditure relates to the activities. Relying solely on records created later, at the time of preparing your company tax return, can result in your claim being ineligible and rejected.
What holds up is contemporaneous documentation kept throughout the year, project logs, lab notebooks, test results, timesheets, and any record showing the genuinely experimental nature of the work, created at the time the work was actually done.
The ATO reviews approximately 20 to 30 per cent of all R&D claims, with first-time claimants and high-value claims attracting particular attention, and when a review is triggered, you typically have 28 days to respond with supporting evidence. A business with twelve months of clean, contemporaneous records can respond succinctly and with the required documentation. A business trying to reconstruct a year’s worth of technical decision-making from scratch, under a 28-day clock, is in a fundamentally weaker position, regardless of how genuine and eligible the underlying work actually was.
What “Eligible R&D” actually means
It’s worth being precise about this because the term gets used loosely. Eligible R&D activities can be split into two streams, core and supporting R&D activities. Core R&D activities are experiments your business conducts following a structured process to solve for an unknown outcome: you start with a hypothesis, you carry out experiments, you observe the outcomes, and you draw conclusions. Supporting R&D activities are activities directly related to those core activities.
In essence, if you already know your solution will work from the outset, it generally doesn’t qualify as genuine experimental R&D, because the whole basis of the incentive is rewarding work where the answer was not known in advance of undertaking the development and testing process.
What eligible expenditure looks like
Eligible expenditure categories generally include employee wages for time genuinely spent on R&D, contractor fees, cloud hosting and software costs connected to the R&D work, materials and consumables, depreciation on R&D-related assets, and an appropriate apportionment of overheads. The common thread across all of these categories is that the expenditure needs to be clearly traceable and have a nexus to a specific registered activity, not just sitting somewhere in your general business costs.
Who can actually claim
Only Australian companies can claim the R&D Tax Incentive, specifically companies incorporated in Australia or foreign-owned companies that are Australian tax residents. Sole traders, partnerships, and trusts can’t claim the incentive, regardless of how genuinely eligible their underlying R&D activity might be.
There’s also a minimum spend threshold: notional R&D deductions must total at least $20,000 for the year, except for expenditure paid to a registered Research Service Provider, which isn’t subject to the same minimum.
What’s changing, and why that makes good records even more valuable
The current 43.5% offset rate for companies with turnover under $20 million remains in place for the 2025-26 and 2026-27 income years, with reforms announced in the 2026-27 Federal Budget not expected to take effect before 1 July 2028.
When those reforms do land, they’re meaningful. The core offset rate is set to increase, the intensity threshold required to access the premium rate drops from 2% to 1.5%, meaning more companies qualify for the higher rate, supporting R&D expenditure as a separate category is being eliminated, and the refundable offset cap is rising significantly, with the turnover threshold for refundability increasing from $20 million to $50 million. Some currently non-refundable claimants, particularly high-growth companies with turnover between $20 million and $50 million, will move to a refundable offset under the new rules, which is a meaningful cash flow improvement for scaling businesses.
None of this changes anything about what you need to do for the 2025-26 or 2026-27 claim years specifically, but it does reinforce the underlying point. As thresholds rise and the rules tighten around what counts as a core versus supporting activity, AusIndustry will scrutinise claims more closely, and the businesses that sail through that scrutiny will be the ones with clean, contemporaneous records showing exactly which dollars went to which activity. Building that discipline now, starting with this financial year, puts you in a stronger position both for this year’s claim and for navigating the more demanding rules ahead.
What to set up this month, not next April
The single most useful thing you can do in July is decide, in advance, which projects or activities you believe will be genuinely eligible R&D this year, and start tracking them as separate, identifiable streams of work from the very first week, rather than treating R&D tracking as something to retrofit once the year is mostly over.
Using tracking categories in your accounting software, like Xero, makes it considerably easier to keep the records you’ll need, so you’re not digging through twelve months of general business expenses later trying to identify which costs actually relate to eligible work. The same applies to timesheets: if technical staff are splitting their time between R&D and ordinary operational work, that split needs to be recorded as it happens, not estimated retrospectively as a rough percentage.
If this is your first time considering a claim, it’s worth having a proper conversation with us early in the financial year rather than in March or April. First-time claimants attract particular attention from the ATO’s review process, and getting the eligibility assessment and record-keeping approach right from the outset makes a meaningful difference to how smoothly that first claim goes.
Your 1 July R&D Tax Incentive Checklist
Confirm eligibility before you start tracking
- Confirm your business structure qualifies (Australian incorporated company, or Australian tax resident foreign-owned company)
- Identify which planned activities for the year ahead are likely to meet the genuine technical uncertainty test
- Distinguish core R&D activities from supporting activities and from ordinary operational work that won’t qualify
- Confirm you expect to meet the $20,000 minimum notional R&D deduction threshold for the year
Set up tracking from day one
- Create separate cost tracking categories for R&D expenditure in your accounting software
- Set up timesheet codes that distinguish R&D time from ordinary engineering, development, or operational time
- Establish a project log or similar contemporaneous record for each activity you intend to claim
- Brief technical staff on what needs to be documented and why, at the start of the project, not at the end
Build the evidence trail as you go
- Record hypotheses, experiments, observations, and conclusions as the work happens
- Keep contractor invoices and agreements clearly linked to the specific R&D activity they relate to
- Retain evidence of materials, consumables, and cloud or software costs tied to R&D work
- Document overhead apportionment methodology at the time it’s decided, not reconstructed later
Diarise the deadlines now
- Registration deadline: 10 months after year end (30 April 2027 for the 2025-26 income year)
- Note that no extensions are available from either AusIndustry or the ATO
If this is your first claim
- Have an eligibility conversation with us early in the financial year
- Don’t wait until March or April to determine whether your activities qualify
This article is general in nature and does not constitute financial, tax, or legal advice. R&D Tax Incentive eligibility is assessed on a self-assessment basis and individual circumstances vary significantly. You should speak with a qualified adviser before making decisions or claims based on your specific activities.