The R&D Tax Incentive is the largest single source of government support for innovation in Australia, and one of the most under-claimed by smaller companies. It rewards businesses that take a genuine technical risk to develop something new. If your company runs experimental work to resolve a technical unknown, a meaningful slice of that spend can come back to you, often as cash.
Below is a plain-English guide to how the program works in 2026, who qualifies and the deadlines that quietly catch claimants out. The structure is stable, but the rates and rules deserve a current check before you rely on them.
How the Offset Works
The R&D Tax Incentive (RDTI) is jointly run by the Department of Industry, Science and Resources through AusIndustry, and the Australian Taxation Office. AusIndustry registers your eligible activities; the ATO administers the claim through your company tax return. You deal with both, and the two steps happen in sequence.
The benefit comes as a tax offset calculated on your eligible R&D expenditure. The size of that offset depends on your aggregated turnover. Smaller companies receive a refundable offset, which matters enormously in a loss year. Larger companies receive a non-refundable offset tiered by how R&D-intensive they are.
The 43.5% Refundable Offset for Companies Under $20M
If your company has aggregated turnover under $20M, you can claim a refundable offset equal to your company tax rate plus an 18.5% premium. For a base rate entity on the 25% company tax rate, that produces a 43.5% offset on eligible R&D spend.
The word “refundable” is the part that changes lives. In a year where your company makes a tax loss, which is common for early-stage and growth businesses pouring money into development, the offset is paid to you as cash once it has reduced any tax payable to nil. A company spending $200,000 on eligible R&D in a loss year could see a refund in the order of $87,000, subject to its circumstances.
That cash position is why the RDTI is so valuable to startups and scaling firms. It is general guidance only, so confirm the current rate and your company tax rate with your registered tax agent before you model a refund.
The Intensity-Tiered Offset for Companies $20M and Over
If your aggregated turnover is $20M or more, the offset is non-refundable and tiered by R&D intensity, meaning your eligible R&D expenditure as a proportion of total expenditure for the year.
The rate is your company tax rate plus a premium that steps up with intensity. Confirm the current tier wording against the ATO, but as it currently stands the premium is 8.5% for the portion of R&D expenditure up to 2% of total expenditure and 16.5% for the portion above 2%. A non-refundable offset reduces tax payable and can be carried forward where it cannot be used, rather than being paid out as cash.
A separate cap applies at the top end. For notional R&D deductions above $150M in an income year, the premium falls away and the offset reverts to the company tax rate.
Eligible Activities and Expenditure
The program funds experimental activities, not business-as-usual work. Core R&D activities are experiments whose outcome cannot be known in advance and which you conduct to generate new knowledge by resolving a technical unknown. Supporting R&D activities are those directly related to and undertaken to support that core work.
Eligible expenditure typically includes salaries and wages for staff on the R&D, contractor costs, consumables used in experiments and a reasonable apportionment of overheads. The discipline that wins claims is contemporaneous record-keeping that ties each dollar to a registered activity. Marketing, routine quality control and straightforward adaptation of existing products generally do not qualify.
The $20,000 Minimum and the Research Service Provider Exception
To claim the offset, your notional R&D expenditure for the year must be at least $20,000. Below that threshold the offset is not available.
There is one practical exception. If you engage a Registered Research Service Provider to conduct your R&D, the $20,000 minimum does not apply, which opens the door to smaller projects run through an approved provider.
Registration, Deadlines and Record-Keeping
You must register your R&D activities with AusIndustry for every income year you want to claim, and you must do it within 10 months of the end of your company’s income year. For a standard 30 June year end, that places the deadline at 30 April the following year. Miss it and the claim for that year is generally lost, so the deadline is the single most important date to protect.
Registration gives you a unique number that you then use to claim the offset in your company tax return. Earlier registration also moves faster. Applications lodged within 6 months of year end are processed more quickly than those lodged in the later part of the window.
Records are the backbone of a defensible claim. Keep evidence created at the time, including project plans, hypotheses, test results, lab notes, timesheets and expenditure records, that demonstrates both the experimental nature of the work and the spend attached to it. Strong records are what stand up if your claim is later reviewed.
One forward-looking note: the Government announced changes to the RDTI in the 2026 to 2027 Budget, with commencement flagged for 1 July 2028. Plan around current rules for now and watch for detail as it firms up.
Where Foothold Advisory Can Help
The RDTI rewards good preparation. The companies that claim well are the ones that identify eligible activities early, keep clean records through the year and register on time. The ones that miss out usually leave it too late or never test their eligibility at all.
If you are not sure whether your work qualifies, a Foothold Advisory Funding Health Check maps your activities and spend against the program and flags any other grants and incentives you may be leaving on the table. We can also run a focused grant eligibility review on the RDTI specifically, so you know where you stand before a deadline does the deciding for you.
General information only. This article provides general information about Australian grants, incentives and tax concepts and is current as at its publication date. It does not take into account your objectives, financial situation or needs. It is not tax, financial or grant-eligibility advice. Foothold Advisory is not a registered tax agent. Grant programs, eligibility rules, funding amounts and round dates change frequently and can close without notice. Before acting, confirm current details with the relevant program authority (business.gov.au, the ATO or the administering department) and seek advice for your situation.