Enter your turnover band, eligible R&D expenditure and company tax rate, and the calculator estimates your R&D tax offset and how much more it is worth than an ordinary deduction.
It uses the offset rates published by the ATO and business.gov.au, which apply to income years starting on or after 1 July 2021, and covers both the refundable offset for companies under $20 million aggregated turnover and the non-refundable offset, with its R&D intensity tiers, for everyone else. It is an estimate, not advice.
A refundable offset. If the company is in tax losses the offset is paid as a cash refund, so the whole $217,500 is cash. If it is profitable, the extra value over a normal deduction is the 18.5 percent premium, $92,500.
Talk to us about your claim→Estimate only, not advice. The result assumes all of the expenditure entered is eligible and that the company and its activities meet every requirement of the R&D Tax Incentive, including registration with AusIndustry within 10 months of year end. It does not take into account clawback, feedstock adjustments, associate expenditure, grants received, or your own tax position, and it is not a substitute for advice on your circumstances. Speak to our R&D team before relying on any figure.
The offset is worked out on the notional deductions for your eligible R&D expenditure. Which offset you get depends on aggregated turnover.
| Aggregated turnover | Offset | Rate at 25% tax | Rate at 30% tax |
|---|---|---|---|
| Under $20 million | Refundable: tax rate + 18.5% | 43.5% | 48.5% |
| $20 million or more, R&D up to 2% of total expenditure | Non-refundable: tax rate + 8.5% | 33.5% | 38.5% |
| $20 million or more, R&D above 2% of total expenditure | Non-refundable: tax rate + 16.5% | 41.5% | 46.5% |
Source: ATO, Rates of R&D tax incentive offset, and business.gov.au, Overview of the R&D Tax Incentive. A company controlled by income tax exempt entities gets the non-refundable offset whatever its turnover.
Without the incentive, R&D spending would usually be deductible at your company tax rate anyway. The net benefit is the offset less that ordinary deduction, which is the premium.
Eligible R&D expenditure of less than $20,000 in a year generally cannot be claimed, unless the R&D is done by a registered research service provider or you contribute to the Cooperative Research Centres Program.
The premium applies to notional R&D deductions of up to $150 million in an income year. The part above that earns only the company tax rate, and the calculator applies this.
A refundable offset is paid as cash where it exceeds the tax payable. A non-refundable offset reduces tax payable, and an unused amount can be carried forward if it meets the carry forward rules.
A company with aggregated turnover over $20 million, taxed at 30 percent, spends $2.4 million on eligible R&D against $40 million of total expenditure. Its R&D intensity is 6 percent. The first 2 percent of total expenditure, $800,000, earns the lower premium, and the remaining $1.6 million earns the higher one.
| Tier | Expenditure | Rate | Offset |
|---|---|---|---|
| Up to 2% of total expenditure | $800,000 | 38.5% | $308,000 |
| Above 2% of total expenditure | $1,600,000 | 46.5% | $744,000 |
| Total non-refundable offset | $2,400,000 | 43.8% | $1,052,000 |
| Less ordinary deduction at 30% | $720,000 | ||
| Net benefit | $332,000 |
The example is illustrative and the company is hypothetical. For a group this size the harder questions are which entities are connected or affiliated, how wages and overheads are apportioned to R&D, and whether any work done overseas needs an overseas finding. That is where an R&D tax incentive consultant earns the fee.
We can test which of your activities qualify, firm up the number and quote a fixed fee for the claim, whether it is your first or you run R&D across a group.
Contact Prime Innovation→Once a month we send our latest thinking on tax, business, and the moments that shape a year. Practical, considered, and written for people who would rather understand the why than chase the headline.
