R&D Tax Incentive 2026 Guide

What is the R&D Tax Incentive?

The R&D Tax Incentive (R&DTI) is Australia's flagship innovation support program, jointly run by AusIndustry (Department of Industry, Science and Resources) and the ATO. Eligible companies get a tax offset on money they spent attempting to resolve a genuine technical uncertainty through systematic experimentation.

For companies under $20M aggregated turnover, the offset is refundable - if you're pre-revenue or in tax loss, the ATO pays you the cash.

FY26 rates at a glance

• Refundable tier (turnover < $20M): your company tax rate + 18.5 percentage points. For a 25% base-rate-entity, that's a 43.5% offset on eligible expenditure.
• Non-refundable tier (turnover ≥ $20M): tiered by R&D intensity. +8.5pp up to 2% intensity, +16.5pp above.
• R&D expenditure cap: $150M per year. Spend above the cap drops to the company tax rate only.

Who can claim?

You must be an R&D entity: a body corporate incorporated under Australian law (or certain foreign corporations tax-resident here). Sole traders, trusts and partnerships can't claim directly.

The eligibility test

Your activities split into two buckets:

Core R&D activities

Experimental activities whose outcome could not have been known or determined in advance, conducted to acquire new knowledge, following a systematic progression of work from hypothesis to experiment, observation and evaluation, to logical conclusions.

Supporting R&D activities

Activities directly related to a Core activity, undertaken for the dominant purpose of supporting it. Production-style work generally needs a stricter nexus.

What's excluded

• Routine software development and bug-fixing
• Market research, sales promotion, management studies
• Compliance with statutory standards or testing requirements
• Mineral or petroleum exploration
• Activities to comply with non-R&D regulations

Key dates for FY26

• 30 April 2027 - AusIndustry registration deadline for the FY26 income year (10 months after year-end for standard 1 July–30 June). Miss this and you cannot claim.
• Lodge company tax return with the R&D Tax Incentive Schedule after registration is approved.

What evidence do you need?

AusIndustry and the ATO can review your claim up to 4 years after lodgement. Contemporaneous evidence is non-negotiable. For software companies that typically means:

• Commits, PRs, design docs that show the systematic progression
• Ticket history (Jira/Linear) showing hypothesis, experiment, evaluation
• Time records or apportionment showing who worked on what
• Payroll & GL detail for cost substantiation
• Contracts for anything bought, built or commissioned

The AusIndustry application

You'll register each R&D project, then within it each Core activity (hypothesis, variables, experiment, observation/evaluation, conclusions/new knowledge) and each Supporting activity (with the directly-related and, where applicable, dominant-purpose nexus). The customer portal enforces character limits and structured fields — exports from RDTI Lodge are organised to map onto those fields.

What the ATO R&D Schedule asks

Alongside your CTR you lodge the R&D Tax Incentive Schedule: registration number, notional deductions by category, aggregated turnover, the offset calculation, and any feedstock or clawback adjustments.

Common mistakes

• No hypothesis. "We built X" isn't a Core activity. "We did not know whether X would behave like Y at scale Z" is.
• Production work as supporting. Anything resembling normal production needs the dominant-purpose test to bind.
• Overseas activities need a separate Overseas Finding application - file before year-end.
• Associate payments not paid by year-end aren't deductible in that year.