R&D and Government Incentives

R&D Tax Incentive services to help Australian innovators thrive

The Research and Development (R&D) Tax Incentive is a significant driver of innovation in Australia. It encourages companies to undertake R&D activities they might not otherwise be able to fund, but many companies find accessing tax incentives difficult and time consuming. Without someone to guide them through the process, some choose not to take this major step forward. 

Our team of specialists understand the Australian tax incentive system and have extensive experience in successfully preparing applications and obtaining R&D benefits. This can be for both activities undertaken to acquire new knowledge, and information in relation to new or improved materials, products, devices, processes or services. BDO also advise on various grants programs funded by the Commonwealth and State governments —  another major source of funding for R&D in Australia. 

Is your organisation eligible for R&D benefits?

BDO's R&D tax specialists have extensive experience in successfully preparing applications and obtaining research and development benefits.

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How BDO can help

BDO can help you access research and development tax incentives by: 

  • Identifying eligible R&D activities, including classification of ‘core’ and ‘supporting’ activities
  • Reviewing technical documentation to support the eligibility of R&D activities and expenditure, providing feedback as necessary to ensure the most robust R&D registration
  • Analysing and identifying R&D expenditure, ensuring proper scrutiny of the more complex rules regarding feedstock, grants or recoupments, capital acquisitions and ‘on own behalf’
  • Preparing and negotiating advance findings to determine activity eligibility prior to lodgement
  • Preparing applications for overseas findings for R&D activities conducted outside Australia
  • Reviewing and advising on your internal systems and processes to make data collection and compliance more efficient
  • Advising on the best way to structure future R&D projects to maximise your benefit
  • Preparing ‘letters of comfort’ for R&D financing.

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What R&D Tax Incentives are available?

For financial years starting after 1 July 2021:

  • Companies with an aggregated turnover of less than $20 million (that are not tax exempt or controlled by tax exempt entity), attract either a 43.5 per cent or 48.5 per cent refundable tax offset on their eligible R&D expenditure 
  • All other companies attract a non-refundable R&D tax offset where the offset rate is based upon the intensity of your R&D expenditure as a proportion of total expenditure for the year:
    • An R&D intensity up to 2 per cent receives a tax offset equal to your company tax rate plus an 8.5 per cent premium
    • Any expenditure which exceeds the 2 per cent intensity threshold will attract a premium rate of up to 16.5 per cent (i.e. up to an additional 8 per cent incentive for the R&D expenditure above the 2 per cent intensity threshold).
  • The opportunities are significant, and we partner with organisations across public and private sectors to help them understand how to best leverage the incentives available. 

R&D Tax Incentive Services

BDO’s R&D taxation specialists provide various compliance and consulting services to support R&D activities and R&D claims. We can: 

  • Manage Australian industry and Australian Tax Office (ATO) compliance activities, including preparing responses to requests for information and full audits
  • Assist with representation before the Administrative Review Tribunal
  • Advise on R&D concessions available in other jurisdictions such as the US, Canada, New Zealand and Singapore with the relevant BDO firms in our international network
  • Advise and manage the various grants programs funded by the Commonwealth and State governments, including the Export Market Development Grant (EMDG) and Commercialisation Grants.

The benefits of using BDO’s R&D Tax Incentive services

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Local expertise with a global presence

Our specialist R&D team proudly support more than 500 of approximately 13,000 R&D claims made in Australia and are backed by our global team across key jurisdictions.

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Industry
 connections

We are strongly connected with Australia’s R&D infrastructure due to our regular interactions with leaders from AusIndustry and the ATO.

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Breadth in
client experience

Our clients operate within the technology, engineering, manufacturing, resource and energy, biotechnology and agriculture industries, ranging from start-ups to large multi-national organisations.

Frequently asked questions 

If you are navigating the R&D Tax Incentive for the first time, our team of experts can assist you in preparing your R&D claim in alignment with the legislation and regulatory requirements whilst maximising the benefits you receive.  

Here are a few common questions that you may have: 

How can I access the R&D Tax Incentive?

If you are an eligible R&D entity, to access the R&D tax offset, you’ll need to:

  • Register your R&D activities with the Department of Industry Science and Resources within 10 months after the end of your financial year, and
  • Include the R&D expenditure attributed to the registered activities in a R&D Tax Incentive Schedule, which forms part of the Income Tax Return, and submit the Income Tax Return to the ATO.

What is an R&D entity?

You qualify as an R&D entity if you're a corporation that is:

  • Incorporated under Australian law, or
  • Incorporated under foreign law but considered an Australian resident for tax purposes, or
  • Incorporated under foreign law, and
    • A resident of a country with which Australia has a double tax agreement that defines ‘permanent establishment’, and
    • Actively conducting business in Australia through such a permanent establishment. If you are an R&D entity, you may also need to consider the special rules applied to consolidated groups and R&D partnerships. Other conditions may also apply, depending on whom the R&D activities are being conducted for.

Does my R&D entity need to have income or have completed my R&D activity to access the R&D tax offset?

No, the R&D tax offset is calculated based upon the R&D expenditure incurred on the R&D activities in the income year, irrespective of whether the company has income or whether the R&D activity is ongoing or completed. Those entities that qualify for the refundable tax offset and have no or little income tax to pay can receive the offset as a cash refund. The refundable tax offset is applied to any income tax liabilities before being paid as cash.

What counts as eligible R&D activity?

  • Eligible R&D activities must be conducted to create new knowledge in the form of new or improved products, processes or services
  • The activities must be performed for the claimant entity and not to a significant extent for another entity (unless conducted for a foreign related entity). In most cases, only R&D activities carried out in Australia qualify for the incentive. However, overseas activities may also be eligible if they meet specific eligibility criteria
  • To qualify, your R&D activity must involve either core R&D activities or supporting R&D activities.

What are core R&D activities?

These are experimental activities designed to generate new knowledge. To be eligible, they must:

  • Have outcomes or approaches that can’t be known in advance using existing knowledge or experience
  • Follow a systematic approach — from hypothesis to experiment, observation, and evaluation
  • Be grounded in established scientific principles
  • Aim to create new or improved materials, products, devices, processes, or services.

Some activities are specifically excluded from this category, such as the reproduction of a commercial product or process (where that knowledge is publicly available).

What are supporting R&D activities?

These are activities that directly support your core R&D activity. In some cases, they must meet a dominant purpose test, meaning they’re primarily undertaken to support core R&D.
This applies especially to activities that:

  • Involve producing goods or services
  • Are excluded from being classified as core R&D activities.

What if I received a grant or sold the output of my R&D activities?

There are certain ‘clawback’ provisions to ensure R&D entities are not ‘double dipping’. However, the extent of this clawback is dependent on the facts, and as the clawback is delivered as assessable income, the R&D expenditure incurred on these grants and outputs may still be beneficial in some circumstances.

Can I claim my sweat equity on the R&D activity?

The R&D tax offset is calculated based upon the amounts ‘incurred’ by the R&D entity in the income year. Furthermore, amounts incurred to ‘associates’ of the R&D entity (such as the owners) must be paid in the income year to be eligible. There is an expectation that contemporaneous documentation exists to support the amounts attributed to the R&D activities (invoices, timesheets etc.).

If you have any further questions around R&D eligibility for your organisation, contact our R&D and Government Incentives team to discuss.

Does your business operate globally?

See how the Australian R&D Tax Incentive compares to R&D incentive programs in other jurisdictions using the BDO Global interactive tool.

LEARN MORE

Contact us

Contact our team to discuss your needs using the request for service form.
Alternatively, call 1300 138 991 to speak with an adviser in your nearest BDO office.

Meet our National Leader

Nicola Purser

Nicola Purser

National Leader, R&D & Government Incentives
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