What is the R&D Tax Incentive?

The Research and Development (R&D) Tax Incentive (RDTI) encourages companies to engage in R&D by providing a tax offset for eligible R&D activities.

The RDTI has two core components. Entities engaged in R&D may be eligible for:

• a 43.5% refundable tax offset for eligible entities with an aggregated turnover of less than $20 million per annum, provided they are not controlled by income tax exempt entities

• up to 46.5% non-refundable tax offset (refer here) for all other eligible entities (entities may be able to carry forward unused offset amounts to future income years).

The rate of the R&D tax offset is reduced to the company tax rate for that portion of an entity's notional R&D deductions that exceed $150 million for an income year.

The RDTI replaced the R&D tax concession from the 1st July 2011 and applies differently from the concession.

The R&D tax incentive aims to boost competitiveness and improve productivity across the Australian economy by:

• encouraging industry to conduct R&D that may not otherwise have been conducted

• improving the incentive for smaller firms to undertake R&D

• providing business with more predictable, less complex support

The RDTI is jointly administer by the Australian Tax Office and the Department of Industry, Science, Energy and Resources (DISER) – and specifically its AusIndustry team.

Your R&D activities must be registered with the AusIndustry before the tax offset is claimed. It is AusIndustry that determine if the expenditure claimed in your tax return for your R&D activities is eligible for the tax offset.

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