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What does self-assessment mean?

Like the rest of the tax system, the R&DTI is based on self-assessment. This means you are responsible for ensuring you and your R&D activities are eligible before applying for the program.

Full eligibility definitions for the R&DTI are outlined in section 355 of the Income Tax Assessment Act 1997.

Eligible entities

Before assessing the eligibility of your R&D activities, you should first determine whether you are an eligible R&D entity.

You are an eligible R&D entity if you are a corporation that is any of the following:

  • incorporated under an Australian law
  • incorporated under a foreign law but an Australian resident for income tax purposes
  • incorporated under a foreign law and you are both:
    • a resident of a country with which Australia has a double tax agreement that includes a definition of 'permanent establishment'
    • carrying on business in Australia through a permanent establishment as defined in the double tax agreement.

Decisions about the eligibility of entities for the R&DTI are made by the Australian Taxation Office (ATO). Further detail (including information about consolidated or multiple entry consolidated groups) is available on the ATO’s Eligibility for R&D tax offsets page.

Eligible activities

Your R&D activities are eligible if they are either core R&D activities or directly related to core R&D activities (supporting R&D activities).

Some activities are excluded from being core R&D activities.

You may be able to claim the R&D tax offset for activities conducted overseas but you must have a positive overseas finding in place before you claim.

Decisions about the eligibility of activities for the R&DTI are made by the Department of Industry, Science and Resources (the department).

Core R&D activities

Core R&D activities are experimental activities that are conducted to generate new knowledge (such as new or improved materials, products, processes or services) where the outcome:

Supporting R&D activities

Supporting R&D activities are activities that are directly related to a core R&D activity.

Some activities will need to fulfill an additional requirement before they can be supporting R&D activities. If your activity is excluded from being a core R&D activity or produces or directly relates to producing goods or services, then it will need to be conducted for the dominant purpose of supporting a core R&D activity.

You may be able to register supporting R&D activities that produce or are directly related to producing goods or services. This includes goods and services a business provides to another entity as well as goods and services a business supplies to itself.

However, you must be able to show that you conduct these activities for the dominant purpose of supporting a core R&D activity.

You may have multiple purposes for conducting an activity. Dominant purpose refers to the prevailing reason for conducting a supporting R&D activity.

Activities that are likely to have the dominant purpose of supporting a core R&D activity include activities that:

  • have no other purpose than to assist or facilitate a core R&D activity
  • have insignificant commercial benefit
  • produce items that you consume, or you expect to consume in your experiment
  • create a component to use in a core R&D activity where it serves no other purpose, such as a part of the experimental apparatus.

Excluded core R&D activities

Some activities are excluded from being core R&D activities.

Excluded core R&D activities may still qualify as supporting R&D activities if they are:

  • directly related to an eligible core R&D activity, and
  • conducted for the dominant purpose of supporting that core R&D activity.

  • Market research, market testing or market development, or sales promotion. This includes consumer surveys.
  • Prospecting, exploring or drilling for minerals or petroleum for the purposes of one or more of the following:
    • discovering deposits
    • determining more precisely the location of deposits
    • determining the size or quality of deposits.
  • Management studies or efficiency surveys.
  • Research in social sciences, arts or humanities.
  • Commercial, legal and administrative aspects of patenting, licensing or other activities.
  • Activities associated with complying with statutory requirements. Or standards, including one or more of the following:
    • maintaining national standards
    • calibrating secondary standards
    • routine testing and analysis of materials, components, products, processes, soils, atmospheres and other things.
  • Any activity related to the reproduction of a commercial product or process:
    • by a physical examination of an existing system; or
    • from plans, blueprints, detailed specifications or publicly available information.
  • Developing, modifying or customising computer software where the dominant purpose is use by any of the following entities for their internal administration (including the internal administration of their business functions):
    • the entity or developer for which the software is developed, modified or customised
    • an entity connected with the developer
    • an affiliate of the developer, or an entity of which the developer is an affiliate.

Eligible R&D expenditure

You can only claim expenditure incurred on R&D activities which are eligible and have been registered by the department.

You need to self-assess if your expenditure is eligible before claiming it through your company tax return with the ATO.

More information can be found on the ATO’s Amounts you can claim page.

You must spend at least $20,000 on eligible R&D

To be eligible for a tax offset under the R&DTI, the R&D expenditure for your income year must be at least $20,000. This expenditure threshold does not apply if you use a research service provider to conduct your R&D.

$150 million threshold on R&D claims

The maximum amount you can claim as expenditure in a single income year for eligible R&D activities is $150 million. For R&D expenditure exceeding $150 million, the tax offset is equal to your company tax rate – meaning you may not get any further tax benefit.

More information can be found on the ATO’s Rates of R&DTI offset page.

Assuring eligibility

If you would like certainty about whether your R&D activities are eligible before applying for the R&DTI, you can ask the department to make a legally binding decision called an advance finding.