- Guide 2 of 5
- Income Tax Assessment Act 1997, s 355-100; Industry Research and Development Act 1986
- Checked 10 October 2026
The R&D Tax Incentive: the offset rates, the $20,000 floor and registration
The R&D Tax Incentive is a tax offset in Division 355 of the Income Tax Assessment Act 1997, worked out on an R&D entity’s notional R&D deductions for an income year. Where the entity’s aggregated turnover is less than $20 million, and item 2 of the Act’s table (control by exempt entities) does not apply, the offset is its corporate tax rate plus 18.5 percentage points and is refundable; otherwise it is the corporate tax rate plus a premium tied to how much of its spending is R&D. The activities must first be registered, on an application made within 10 months after the end of the income year.
General information only, not tax advice. The official places to check are business.gov.au’s R&D Tax Incentive pages and the Australian Taxation Office.
The rate, as the Act sets it
business.gov.au calls the R&D Tax Incentive “a legislated program” that offsets some of the costs of eligible research and development, open to all industry sectors and company sizes. The rate itself is a table in section 355-100(1), read here as compiled on 27 August 2026 (compilation 267).
| Item | In this case | The percentage is |
|---|---|---|
| 1 | “the R&D entity’s aggregated turnover for the income year is less than $20 million (and item 2 of this table does not apply)” | “the R&D entity’s corporate tax rate for the income year, plus 18.5 percentage points” |
| 2 | At any time in the income year an exempt entity, or a combination of exempt entities, would control the R&D entity in the way section 328-125 describes, reading its 40% as 50% and ignoring s 328-125(6) | The R&D entity’s corporate tax rate for the income year |
| 3 | “any other case” | The R&D entity’s corporate tax rate for the income year |
Note 1 to the section: “The tax offset will be a refundable tax offset if item 1 of the table applies (see section 67‑30).” Where item 2 or 3 applies, section 355-100(1A) adds a premium, worked out on the R&D entity’s total expenses for the year under section 355-115:
- 8.5% of the part of the notional deductions that exceeds nil but does not exceed 2% of total expenses;
- 16.5% of the part that exceeds 2% of total expenses.
So the offset is never one flat rate. It moves with the company’s own corporate tax rate, with its turnover and, above item 1, with its R&D intensity.
Below $20,000, and above $150 million
Under section 355-100(2), if the total of the notional deductions is less than $20,000, the offset is worked out only on two kinds of spending: R&D expenditure paid to a research service provider that is not an associate, for services in a research field it is registered for, and contributions to a Cooperative Research Centre (CRC).
“(3) Despite subsections (1) and (1A), if the total amount mentioned in subsection (1) exceeds $150 million, the R&D entity is instead entitled to a tax offset for the income year equal to the sum of:
(a) the amount worked out in accordance with those subsections as if that amount were $150 million; and
(b) the product of the excess and the R&D entity’s corporate tax rate for the income year.”
Income Tax Assessment Act 1997, s 355-100(3)
Read whole, $150 million is where the rates change, not where the offset stops: the amount above it is still counted, at the corporate tax rate.
Registration comes first
The Industry Research and Development Act 1986 explains why: “This registration is needed before the R&D entity can be entitled to a tax offset (an R&D tax offset) under Division 355 of the Income Tax Assessment Act 1997 for the R&D activities.” The registering body is the Board, which the Act defines as Industry Innovation and Science Australia. Section 27D says an application must be in the approved form, come with any fee the regulations set, and be made within “10 months after the end of the income year”, or a further period the Board allows under its decision-making principles.
business.gov.au sets out the path in four steps:
- Self-assess. A company checks whether it is eligible before applying. For assurance first, it can apply for an advance finding.
- Conduct the R&D. Keep records, which the department or the ATO may ask for. Claiming spending on R&D done overseas also needs an overseas finding.
- Apply. The department registers R&D activities; the ATO processes the expenditure claims. The department and the ATO may review the activities in a claim, and the department says it may do so before or after registering them.
- Claim. The registration number goes in the R&D Tax Incentive schedule of the company’s income tax return, lodged with the ATO.
One line on that page deserves the most weight: “Registration confirms that your activities have been registered – it does not confirm they are eligible.” The company stays responsible for meeting the program’s requirements. The ATO is also required by law to publish certain details of entities that claim the incentive.
If the Board decides against a company
An application for internal review of a reviewable decision must be made within 28 days after the entity is notified of the decision, or a further period the Board allows. If the Board has not decided within 90 days of receiving the application, it is taken to have confirmed the decision, and an internal review decision can go to the Administrative Review Tribunal.
Announced changes are not yet law
business.gov.au notes that the Australian Government announced changes to the incentive in the 2026–27 Budget, which it says will start from 1 July 2028, and that until then the program continues under the current rules. This guide prints only the Act as compiled, with no announced rate.