R&D FAQs

The Research and Development Tax Incentive (RDTI) is a broad, industry program aimed at encouraging companies to engage in R&D in Australia. Specifically, the program provides a generous tax offset for companies undertaking R&D activities to develop new or improved products, processes, devices or services. The tax offset is claimed in your tax return.

The R&D Tax Incentive is only available for companies incorporated in Australia and the company must have had a for a minimum expenditure of $20,000 in a financial year on one or more eligible R&D activities. This can include costs such as salary and wages, contractors, and direct materials.

Companies wanting to claim the R&D Tax Incentive must be registered with AusIndustry within 10 months of the financial year in which the activities took place. For companies with a 30 June year end, the deadline for lodging your R&D application is 30 April the following year.

The R&D Tax Incentive provides a tax offset for expenditure incurred on eligible R&D activities. This can be either refundable or non-refundable depending on your company’s aggregated turnover or company structure.

Refundable tax offset

For entities with an aggregated turnover of less than $20 million per annum, that are not controlled by tax exempt entities, the company will be eligible for the refundable tax offset. This is provided as an offset of 18.5% above the company tax rate. (For example: A company with $100,000 of R&D expenditure, which is still in losses at the end of the financial year, could get a cheque from the ATO for $43,500 (25% + 18.5%).

Non-refundable tax offset

For entities with an aggregated turnover greater than $20 million per annum, or those that are controlled by tax exempt entities, the company is eligible for the non-refundable tax offset. The benefit is dependent on your ‘R&D intensity’ which is calculated using R&D expenditure over the total company expenditure. The benefit is then broken down into two tiers:

• For R&D intensity up to 2%, an offset of 8.5% above the company tax rate applies. (For example: A company with $100,000 of R&D expenditure which is in profit at the end of the financial year, could get a tax offset of $33,500 (25% + 8.5%) against its tax bill).
  
• For R&D intensity over 2% receives, an offset of 16.5% above the company tax rate applies. For example: A company with $100,000 of R&D expenditure and total expenditure of $1 million, would get a tax offset of $39,900. This includes $6,7000 (25% + 8.5% for the first 2% ($20,000)) plus $33,200 (25% + 16.5% for the remaining $80,000).

Where a company incurs R&D expenditure in excess of $150 million in any one year, the offset for expenditure over the cap of $150 million is restricted to the company tax rate for that expenditure only.

Eligible Activities

Generally, eligible R&D activities are those undertaken for the purpose of developing new or improved products or processes. R&D activities are experimental in nature and whose outcome cannot be determined in advance.

If you’re developing something new or improved, or solving a technical problem by following an experimental process, your company may be eligible to claim.

• Highly competitive fees
• More than 20 years of top tier experience, with a collaborative approach.
• Well supported, compliance focused claims

View the flowchart below or contact us to determine your company's eligibility.

The EMDG program is currently being refocused. These changes include:

• Developing and approving revised EMDG rules and grant guidelines
• Developing program documentation
• Conducting communication and outreach activities
• Making changes to the EMDG online portal and the grants management platform.

These changes are expected to apply to Round 4 of the EMDG program and applications for Round 4 grants are likely to open in late 2024 or early 2025.

‘Approved bodies’ include the following: Australian individuals, partnerships, companies, associations, cooperatives, statutory corporations, or trusts carrying on business in Australia, and:

• Have annual income below $50 million
• Have minimum eligible expenditure of $15,000 per annum
• Are the principal, that is, you own the product you are promoting
• Promoted the product for export, and the product is:
  • a good made in Australia
  • a good made outside Australia where Australia will derive a significant net benefit from its sale overseas
  • an eligible service
  • a tourism service
  • an event held in Australia
  • an intellectual property right that mainly resulted from work done in Australia
  • a trade mark first used in Australia, or which has significantly increased in value from its use in Australia, or
  • know-how that mainly resulted from work done in Australia.

Eligible expenses are those which promote the export of Australian goods or services. Some specific eligible costs are listed below:

• Overseas IP registration and related insurance (overseas PCT filings) – up to $50,000 per annum
• Overseas representatives – expenses incurred in maintaining overseas representatives to promote your products, up to $200,000 per annum
• Marketing consultants – for market research or marketing activities, up to $50,000 per annum
• Marketing visits – travel costs and allowances for marketing visits
• Free samples – costs for providing free samples of the product, up to $15,000 per annum
• Trade fairs, seminars, in-store promotions
• Promotional literature and advertising – brochures, videos, advertising, website development
• Overseas buyers – costs of bringing potential buyers who are non-residents to Australia for promotional purposes, up to $7,500 per buyer, maximum of $45,000 per application.

Documentary evidence that the expenses have been incurred must be submitted with the application (invoices, bank statements etc).

Ineligible costs include expenses that:

• relate to trade with New Zealand and countries subjected to trade sanctions
• are capital expenses
• are taxes, commission, discounts, or
• are fraudulent, unsubstantiated, related to an illegal activity or may have a detrimental impact on Australia’s trade reputation.

Your grant will be calculated as 50% of (total eligible expenses less $5,000), with a maximum of $150,000, per annum, subject to funds available in the scheme.

Assessment & Payment

After receiving your application, Austrade will assess the application and determine your provisional grant entitlement. Your grant will then be paid under a split payment system which ensures that spending under the EMDG scheme is kept within budget and all eligible applicants receive a grant.

The second tranche payment is distributed after all first payments are made based on a payout factor and will depend on the amount of funds still available when all eligible applicants have received their first payments.

Audits

Each application for the EMDG is audited to ensure full compliance with eligibility and substantiation requirements. All expenses being claimed must be fully documented.

Subsequent Grants for Non-Approved Bodies

If you have already received two grants and are not an Approved Body, you will need to satisfy the requirements of an EMDG performance measure in order to be able to receive third and subsequent grants.

You can elect to meet either the Export Performance Test or the Australian Net Benefit Requirements.

• Under the Export Performance Test, your grant will be limited to a specified percentage of your export income.
• Under the Australian Net Benefit Requirements, you just provide information and documents (including audited financial documents) at the time of application lodgement to show Austrade that you should continue to receive EMDG support.

We have experienced consultants who can assist you throughout the entire application process in order to maximise your claim. FB Rice can help to complete the application, advise on eligibility of expenses, how to document expenditure and assist with the auditing of the claim by Austrade.