Research and Development Tax Incentive Australia 2026: A Complete Accountant's Guide

Australia's Research and Development Tax Incentive (RDTI) is one of the most valuable — and most misunderstood — tax concessions available to innovative businesses. With the Federal Government announcing significant reforms in the 2026–27 Budget that take effect from 1 July 2028, now is the critical window for Australian companies to maximise their current entitlements and prepare for the changes ahead. A qualified accountant with RDTI expertise can be the difference between a successful claim and a costly compliance failure.

Understanding the Research and Development Tax Incentive

The RDTI is a joint program administered by the Australian Taxation Office (ATO) and the Department of Industry, Science and Resources (DISR). It provides eligible companies with a tax offset for expenditure on qualifying research and development activities, designed to encourage innovation and investment in new knowledge.

Only incorporated companies — those registered under Australian law or qualifying foreign residents — can access the RDTI. Sole traders, partnerships, and trusts are excluded. This makes the program particularly relevant for technology companies, manufacturers, biotech firms, agribusinesses, and any enterprise investing in experimental product or process development.

The incentive operates as a self-assessment program, meaning companies must determine their own eligibility, maintain appropriate records, and register their activities within strict deadlines. The ATO and DISR conduct compliance reviews and audits, making professional guidance essential.

How the RDTI Works: Offsets and Thresholds

The financial benefit of the RDTI depends on a company's aggregated annual turnover and tax position. Understanding which offset tier applies to your business is the starting point for any RDTI strategy.

Refundable Offset for Smaller Companies

Companies with aggregated annual turnover below $20 million are eligible for a refundable tax offset of 43.5% on eligible R&D expenditure. This is a significant benefit: even if the company is in a tax loss position, it can receive a cash refund from the ATO. For early-stage innovators burning through capital, this cash injection can be transformative.

Non-Refundable Offset for Larger Companies

Companies with aggregated turnover of $20 million or more receive a non-refundable tax offset based on their R&D intensity — the proportion of eligible R&D expenditure relative to total expenditure. The offset rate ranges from the company tax rate plus 8.5% to plus 16.5%, depending on intensity. Unused offsets can be carried forward to future income years.

Expenditure Thresholds

Under the current rules (applicable to the 2025–26 and 2026–27 income years), companies must incur a minimum of $20,000 in eligible R&D expenditure to make a claim, unless they engage a registered Research Service Provider. The maximum claimable expenditure is $150 million per annum.

What Qualifies: Core and Supporting R&D Activities

The RDTI distinguishes between two categories of eligible activities. Getting this classification right is one of the most technically demanding aspects of any RDTI claim — and a common source of ATO disputes.

Core R&D Activities

Core R&D activities are experimental activities conducted for the purpose of generating new knowledge. To qualify, the activity must involve genuine technical uncertainty — the outcome cannot be known or deducible in advance by a competent professional in the relevant field. The work must follow a systematic progression: hypothesis, planned experiments, observation, and evaluation of results.

Examples include developing a novel software algorithm, testing a new manufacturing process, or conducting clinical trials for a new therapeutic compound. Routine software development, minor product modifications, and market research do not qualify as core activities.

Supporting R&D Activities

Supporting R&D activities are non-experimental tasks that are directly related to, and necessary for, the conduct of core R&D activities. Under current rules, eligible supporting activities can include literature reviews, equipment maintenance directly tied to experiments, and certain administrative functions. However, this category is being abolished from 1 July 2028 — a critical change discussed below.

The 2026–27 Budget Reforms: What Changes from 1 July 2028

The Federal Government's 2026–27 Budget announced the most significant overhaul of the RDTI in years. These reforms do not affect claims for the 2025–26 or 2026–27 income years, but businesses should begin planning now.

• Supporting activities removed: Expenditure on "supporting" R&D activities will no longer be eligible for the tax offset. Only core experimental activities will qualify, narrowing the scope of claimable work significantly.
• Increased offset rates for core activities: To compensate for the narrower scope, offset rates for core R&D activities will increase by 4.5 percentage points across both the refundable and non-refundable tiers.
• Refundable offset restricted to first 10 years: Access to the refundable offset will be limited to companies within their first 10 years of operation. Established companies beyond this threshold will only access non-refundable credits.
• Turnover threshold for refundable offset rises to $50 million: The eligibility threshold for the refundable offset increases from $20 million to $50 million in aggregated turnover, expanding access for mid-sized innovators.
• Minimum expenditure rises to $50,000: The minimum annual R&D spend required for eligibility increases from $20,000 to $50,000, though projects through registered Research Service Providers or Cooperative Research Centres remain eligible below this threshold.
• Maximum expenditure cap rises to $200 million: The annual expenditure cap increases from $150 million to $200 million, benefiting large-scale R&D investors.
• R&D intensity threshold lowered to 1.5%: The intensity threshold for accessing the higher non-refundable offset tier is reduced from 2% to 1.5% of total expenditure.

Businesses that currently rely heavily on supporting activity claims — particularly those in sectors with long development cycles such as biotech, pharmaceuticals, and advanced manufacturing — should urgently review their R&D project structures with a qualified accountant before 2028.

Common Mistakes and Red Flags in RDTI Claims

The ATO and DISR actively review RDTI claims, and non-compliant claims can result in offset repayment, interest charges, and penalties. Understanding the most common errors helps businesses avoid costly mistakes.

• Claiming routine activities as core R&D: Standard software updates, quality assurance testing, and incremental product improvements do not meet the technical uncertainty test. Overstating the experimental nature of activities is the most common audit trigger.
• Inadequate contemporaneous records: Documentation must be created at the time the work is performed — not reconstructed retrospectively. Lab notebooks, project logs, hypothesis statements, and test results must be maintained throughout the project lifecycle.
• Missing the registration deadline: Companies must register their R&D activities with DISR via the AusIndustry Customer Portal within 10 months of the end of their income year. There are no extensions. Missing this deadline forfeits the entire claim for that year.
• Incorrect expenditure allocation: Only expenditure directly related to eligible R&D activities can be claimed. Apportioning wages, contractor fees, and overheads incorrectly — either over-claiming or under-claiming — creates compliance risk.
• Engaging unregistered promoters: The ATO has issued warnings about promoters who encourage aggressive or non-compliant RDTI claims. Promoter penalty laws apply, and businesses can be held liable for claims made on their behalf.
• Failing to consider the aggregated turnover test: The turnover threshold is based on aggregated turnover, which includes the turnover of connected entities and affiliates. Companies that appear small in isolation may exceed the threshold when related parties are included.

Australian Regulatory Context: ATO, DISR, and Compliance Obligations

The RDTI is jointly administered by two government bodies, each with distinct responsibilities. Understanding this dual-agency structure is essential for compliance.

The Department of Industry, Science and Resources (DISR) — through its AusIndustry division — is responsible for assessing whether activities meet the definition of core and supporting R&D. Companies register their activities through the AusIndustry Customer Portal, and DISR may request additional information or conduct findings reviews to assess eligibility.

The Australian Taxation Office (ATO) administers the financial aspects of the claim — calculating the offset, processing refunds, and conducting tax audits. The ATO has the power to amend assessments, impose penalties for false or misleading statements, and apply the general anti-avoidance provisions of Part IVA where appropriate.

In recent years, the ATO has increased its focus on RDTI compliance, particularly around the documentation of technical uncertainty and the distinction between core and supporting activities. Businesses in high-risk sectors — including software development, construction, and food manufacturing — have faced heightened scrutiny. Engaging a registered tax agent or accountant with specific RDTI expertise provides an important layer of protection.

Questions to Ask When Choosing an Accountant for Your RDTI Claim

Not all accountants have the specialised knowledge required to manage an RDTI claim effectively. When selecting a professional, consider asking the following questions to assess their capability and fit.

1. Do you have specific experience with RDTI claims in my industry? The technical requirements vary significantly between software, manufacturing, and life sciences. Industry-specific experience matters.
2. How do you approach the distinction between core and supporting activities? A competent adviser should be able to explain the technical uncertainty test clearly and apply it to your specific projects.
3. What documentation systems do you recommend for contemporaneous record-keeping? Proactive guidance on record-keeping is a sign of a thorough practitioner.
4. Have you managed ATO or DISR reviews or audits for RDTI claims? Experience navigating compliance reviews is invaluable if your claim is ever questioned.
5. How are you preparing clients for the 2028 reforms? Forward-looking advisers should already be discussing the impact of the Budget changes on your current R&D project structure.
6. Are you a registered tax agent with the Tax Practitioners Board (TPB)? Only registered tax agents can legally prepare and lodge tax returns on behalf of clients. Verify registration at the TPB register.
7. What are your fees, and how are they structured? Be cautious of advisers who charge a percentage of the RDTI claim — this fee structure can create incentives for over-claiming.

How MyMoney® Can Help You Find an RDTI-Specialist Accountant

Navigating the Research and Development Tax Incentive requires a combination of technical knowledge, meticulous documentation, and strategic planning — particularly as the 2028 reforms approach. The right accountant can help your business maximise its current entitlements, restructure R&D projects for the new regime, and maintain the contemporaneous records that protect you in the event of an ATO review.

MyMoney® connects Australian businesses with qualified, experienced accountants who specialise in RDTI claims and innovation tax strategy. By posting a brief on our platform, you can receive competing proposals from vetted professionals who understand your industry and your compliance obligations.

Whether you are lodging your first RDTI claim or preparing your business for the 2028 legislative changes, the right adviser makes all the difference. Post a Brief on MyMoney® today to connect with RDTI-specialist accountants, or Browse Accountants on MyMoney® to explore qualified professionals in your area.