The R&D Tax Incentive explained: 43.5% back on your development costs

Published 11 July 2026 · 6 min read

The Research and Development Tax Incentive (R&DTI) is the most valuable funding most Australian businesses have never claimed. If you're building, improving or problem-solving something with a genuinely uncertain outcome, a large chunk of what you spend may be claimable — as cash.

What it actually gives you

Companies with an aggregated turnover under $20 million can claim a refundable tax offset of 43.5% on eligible R&D expenditure. "Refundable" is the important word: if your business is pre-profit or running at a loss because of its development work, the offset comes back to you as a cash refund from the ATO, not just a reduction in tax owed.

The biggest myth: "we don't do R&D"

Most owners picture lab coats and scientists. In reality, eligible R&D includes developing new software, building a novel product, or engineering a better process on the workshop floor — anywhere you're experimenting to resolve a technical unknown that couldn't be worked out just by looking it up. "We don't do R&D" is one of the most expensive sentences in Australian business.

Am I eligible?

• You're an incorporated Australian company (not a sole trader or partnership).
• Aggregated turnover under $20 million for the refundable offset.
• At least $20,000 of eligible R&D spend in the year (with some exceptions).
• Genuine "core" R&D activities involving technical uncertainty and a systematic approach.

The deadline that catches people out

You must register your R&D activities with AusIndustry within 10 months of the end of your income year — for a 30 June year-end, that's 30 April the following year. It's strict and can't be extended, so contemporaneous records kept through the year make claim time far easier.

What to do next

If any of your work this year involved solving a genuine technical problem, it's worth checking. Grantiv's free finder flags the R&DTI alongside other programs that may fit — and an accountant or R&D specialist can confirm your specific eligibility.

A worked example of the numbers

The 43.5% figure is easy to quote and surprisingly hard to picture, so here is what it looks like on a set of round numbers. These are illustrative figures to show the mechanism — your own eligible spend and offset depend on your circumstances and should be confirmed with your accountant.

Say a company with turnover under $20 million spends $200,000 across the year on eligible R&D — mostly the salaries of two developers working on a genuinely uncertain technical problem, plus some contractor time and a share of overheads.

• Eligible R&D expenditure: $200,000
• Refundable offset at 43.5%: $87,000

If the company is profitable, that $87,000 reduces the tax it owes. If the company made a loss that year — which is the normal state of affairs for a business investing heavily in development — the offset is refundable, so the $87,000 comes back from the ATO as cash. That is the part people miss. It is not a deduction that only helps if you are already paying tax. It is money returned to a business that may have paid none.

The same arithmetic at $50,000 of eligible spend returns $21,750. At the $20,000 minimum threshold it returns $8,700. Even at the bottom of the range it is usually worth more than the cost of getting the claim prepared properly.

Common questions

Does software development count?

It can, but not automatically. Building software to a known specification using established techniques generally does not qualify. Building something where you genuinely cannot know in advance whether your approach will work, and you are running experiments to find out, is much closer to the mark. The test is technical uncertainty, not novelty of the product.

Can I claim if I use contractors instead of employees?

Contractor costs can be eligible where the work is conducted for you and meets the activity requirements. Where the work is done overseas, additional rules apply and advance findings may be needed.

What records do I actually need?

Contemporaneous ones — notes, tickets, test results, timesheets and design decisions recorded as the work happened. Reconstructing evidence at claim time is the single most common cause of trouble in a review.

What if I miss the 10-month registration deadline?

The registration deadline is strict and generally cannot be extended, so a missed year is usually a lost year. This is the strongest argument for tracking eligible activity through the year rather than at tax time.

Do I need a company, or will a trust or sole trader work?

You need an incorporated company. Sole traders, partnerships and trusts cannot claim the offset directly, though a company acting as trustee may be able to — worth a specific conversation with your accountant if that is your structure.

Related reading

• Small business grants in Australia — the other programs worth claiming alongside the R&DTI.
• Startup grants in Australia — how the R&DTI fits alongside commercialisation grants for a new company.
• Are Australian business grants legit? — a straight answer on what is real and what is overhyped.

This article is general information, not financial or legal advice. Grant programs, amounts and eligibility change often — always confirm current details on the official government page before applying. Last reviewed July 2026.