Question 1

How is the R&D Tax Incentive offset calculated?

Accepted Answer

The R&D Tax Incentive offset is calculated by applying a percentage rate to your total eligible R&D expenditure. For companies with aggregate turnover under $20 million, the rate is 43.5% (a refundable offset). For companies with turnover between $20 million and $150 million, the base rate is 38.5% (non-refundable), with a higher 43.5% rate available on R&D expenditure exceeding 2% of total expenses. The net benefit is the difference between the R&D offset and what you would receive from a standard tax deduction at the 25% company tax rate.

Question 2

What is the difference between refundable and non-refundable R&D tax offsets?

Accepted Answer

A refundable tax offset (available to companies with turnover under $20 million) pays out the full benefit regardless of your tax liability - if the offset exceeds your tax payable, the ATO refunds the difference as cash. A non-refundable offset (for companies with turnover between $20 million and $150 million) can only reduce your tax payable to zero. Any excess offset amount is converted into a tax loss and carried forward to future income years.

Question 3

What is R&D intensity and how does it affect my claim?

Accepted Answer

R&D intensity measures your R&D expenditure as a proportion of your total deductible expenses for the income year. For companies with aggregate turnover between $20 million and $150 million, R&D intensity determines your offset rate. If your R&D spending is 2% or less of total expenses, you receive a 38.5% non-refundable offset. If your R&D spending exceeds 2%, the portion above that threshold attracts a higher 43.5% offset rate, rewarding companies that invest more heavily in research and development.

Question 4

Can sole traders or partnerships claim the R&D Tax Incentive?

Accepted Answer

No, the R&D Tax Incentive is only available to incorporated companies (Pty Ltd entities) that are registered for the program. Sole traders, partnerships, and trusts cannot directly claim the incentive. However, if you conduct eligible R&D activities through a non-company structure, there may be restructuring options available. A tax adviser can help you explore whether incorporating or using a company within your group structure could allow you to access the R&D Tax Incentive.

Question 5

What is the minimum R&D expenditure to claim the R&D Tax Incentive?

Accepted Answer

There is no minimum expenditure amount to claim the R&D Tax Incentive, but your activities must be registered with AusIndustry (part of the Department of Industry, Science and Resources) within 10 months of the end of the income year. The activities must meet the definition of eligible R&D activities under the Industry Research and Development Act 1986, including core R&D activities that involve systematic experimentation to generate new knowledge or create new processes, products, or services.

Question 6

How much can I save with the R&D Tax Incentive?

Accepted Answer

The saving depends on your turnover and R&D expenditure. For a company with under $20 million turnover spending $500,000 on eligible R&D, the 43.5% refundable offset provides $217,500 - compared to $125,000 from a normal tax deduction, that is an additional $92,500 benefit. For larger companies (turnover $20M-$150M) spending $1 million on R&D, the 38.5% offset provides $385,000 versus $250,000 from a normal deduction - an extra $135,000 in tax savings. Use our calculator above for an estimate based on your specific circumstances.

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R&D Tax Incentive Calculator

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