R&D Tax Incentives For FY25

If you are a company developing a new product, service or process in Australia, you may be eligible for a tax offset under the Research and Development (R&D) Tax Incentive.

There are some steps you can take before EOFY to maximise your Research and Development (R&D) Tax Incentive claim.

About the RDTI

The Australian R&D Tax Incentive (RDTI) is the key federal program for encouraging and supporting businesses undertaking innovation, research and development onshore in Australia.

The incentive is in the form of a tax offset that is received upon lodgement of the tax return, including:

• A 43.5% refundable tax offset for most companies with an aggregated turnover of less than $20 million.
• A non-refundable tax offset of between 33.5% – 46.5% for companies with an aggregated turnover of at least $20 million. The rate of the tax offset will depend on the company’s corporate tax rate and the proportion of the company’s R&D expenditure to total business expenditure.

Who is eligible?

You may be an eligible R&D entity if you are any of the following:

• A company incorporated under an Australian law;
• An overseas company but an Australian resident for income tax purposes;
• An overseas company 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’;
  • and carrying on business in Australia through a permanent establishment as defined in the double tax agreement.

In addition – to be an R&D entity you must also be carrying on eligible R&D activities (see below). If this is you, you can claim eligible R&D expenditure, which covers a range of expenses, or ‘notional deductions’, that have occurred in the relevant financial year and that are directly connected to the R&D activity.

What qualifies as eligible R&D activities?

There are 3 essential R&D ‘ingredients’ that your R&D activities must have to qualify for the tax offset. Activities must be considered:

1. New technical knowledge: the activity is carried out for the purpose of generating new knowledge in the form of new or improved materials, products, devices, processes or services.
2. Technical uncertainty: the outcome of the activity cannot be known or determined in advance based on current knowledge, information or expertise.
3. Experimentation: the activity is experimental in nature and involves a systematic progression of work based on the principles of established science that proceeds from hypothesis to experimentation, observations and evaluations and leads to logical conclusions.

Supporting activities may also be eligible under the incentive. These can include preliminary research, project management, data collection, delivery and installation of equipment and user testing.

The types of questions used to determine if you undertook eligible R&D activities might include:

• Did your spending go toward the development of new knowledge such as novel technology, service or processes?
• Did you face technical uncertainties about whether your development activities would achieve what they set out to do?
• Did you conduct your development activities in an experimental way including a process of testing, learning and modification?
• Did you keep contemporaneous records showing all of the above took place?

Eligible R&D Activities

Here are some examples of the types of R&D costs that may be eligible. Your specialist advisor can assist you with further clarification.

• R&D staff salaries, including on-costs;
• Contractors and consultants engaged to assist in R&D activities;
• Overhead costs where related to R&D (rent, electricity etc);
• Plant leasing costs where related to R&D;
• Materials and consumables directly used for R&D;
• R&D ‘pretotyping’ and prototyping trial costs;
• Travel costs for R&D purposes;
• R&D project management, administration and support costs; and
• Monetary contributions under the CRC program.

What about R&D activities occurring outside Australia?

R&D activities and costs conducted outside of Australia may be claimed under certain circumstances and must be submitted through an Overseas Finding application.

The deadline of 30 June 2025 is nearing for businesses to submit an R&D Overseas Finding application to claim eligible overseas expenditure incurred during this financial year.

Click here for more information about the Overseas Finding application.

What’s the process of claiming the R&D Tax Incentive?

The application details the core and supporting activities conducted during the income year, and must be submitted to AusIndustry within 10 months of the end of the company’s income year. For companies with a 30 June year-end, the application must be submitted by 30 April of the following year.

What do I need to do before 30 June?

To maximise the amount of your R&D claim, here are some simple steps to take for your business before year-end:

• Pay any outstanding employee superannuation liabilities
• Prepay expenses
• Pay any amounts owing to associates, and
• Choose appropriate depreciation rates.

If the business is intending to submit an Overseas or Advance Finding in respect of overseas expenditure, that application must be submitted with AusIndustry before the end of the income year.

We’re here to help

With a dedicated R&D Incentives service line our experienced specialists are well-equipped to provide you with excellent advice on your R&D claims. We can assist you in identifying R&D activities, documentation, applications, and inclusion in your EOFY tax return.
Contact Bentleys SA’s R&D Incentives specialist Peter Wirtz for advice and assistance before 30 June 2025.

[email protected] | D +61 8 8372 7963 | M 0432 474 413

Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.