If you’ve been looking into how to apply for R&D Tax Incentive, you’re probably wondering: How much can I actually claim?
The short answer? It depends on your company size, turnover, and how much of your work qualifies as eligible R&D. The longer answer? Let’s break it down clearly so you know what’s possible – and what’s not – before you lodge with the ATO.
Understand the two types of offsets
The R&D Tax Incentive isn’t a one-size-fits-all deal. The government splits the benefits into two categories:
- Refundable tax offset – for smaller companies with turnover under $20 million.
- Non-refundable tax offset – for larger companies with turnover of $20 million or more.
Both work differently, so let’s look at each.
How much SMEs can claim
If your company has an annual turnover under $20 million, congratulations – you get the more generous option.
- You can claim a refundable offset equal to your company tax rate plus an extra 18.5% premium on your eligible R&D expenditure.
- If you’re in loss, you don’t just lose the benefit – you can actually receive a cash refund from the ATO.
Example: If your tax rate is 25% and you spend $100,000 on eligible R&D, you could claim 43.5% (25% + 18.5%) back. That’s a refund of $43,500.
How much larger companies can claim
If your turnover is $20 million or more, you can still claim, but it’s a non-refundable offset. This means it reduces your tax payable rather than giving you cash back.
The rate depends on your R&D intensity (the percentage of your total expenditure spent on R&D):
- Up to 2% of total expenditure – company tax rate + 8.5% premium.
- Above 2% – company tax rate + 16.5% premium.
Example: If your company tax rate is 30% and your R&D spend represents 3% of your total expenditure, you could claim 46.5% (30% + 16.5%).
Minimum spend rules
Before you get carried away, there’s a threshold:
- Your eligible R&D spend must be at least $20,000 per year.
- If you use a registered Research Service Provider (RSP), you can claim below this threshold.
So, if you’re tinkering with an idea on a shoestring budget, you may not qualify yet.
What counts as eligible R&D spend?
The ATO isn’t going to let you claim anything you slap the word “research” on. To be eligible, your spend must directly link to your R&D activities.
Examples include:
- Salaries for staff conducting R&D.
- Materials used in experiments.
- Contractor costs.
- Certain overheads directly tied to R&D projects.
Non-eligible costs, like marketing or routine business expenses, don’t count. Misclassify them and you risk audits or penalties.
Risks of getting it wrong
Here’s where many SMEs stumble:
- They over-claim, thinking “the more, the better.”
- They rely on a general accountant who doesn’t specialise in R&D claims.
- They don’t keep clear records of how each dollar was spent.
Because the scheme is self-assessed, the ATO can review your claim anytime. If they decide your spend wasn’t eligible, the refund can be clawed back – with penalties.
Quick recap
| Business Type | Offset | Claim rate |
|---|---|---|
| Turnover under $20m | Refundable | Tax rate + 18.5% (cash back possible) |
| Turnover $20m+ | Non-refundable | Tax rate + 8.5% or 16.5% depending on R&D intensity |
So, how much R&D can you claim? Anywhere from 43.5% cash back for smaller companies to significant tax offsets for larger ones – if you get the process right.
Learning how to apply for R&D Tax Incentive properly, keeping records, and understanding what the ATO considers eligible is the difference between maximising your refund and getting stuck in review limbo.
When in doubt, lean on an R&D tax specialist – they’ll make sure you claim every eligible dollar without crossing the line.
If you would like to engage an R&D Tax Incentive specialist to determine whether or not your company qualifies for the R&DTI then please reach out to Alan Baghdasarayan, Government Grants & Incentives Director at BridgePoint Group who will provide a free 30-minute consultation.
