By the Advisory Team at Quantum House | Chartered Accountants & Tax Advisers, Sydney
Making your first R&D Tax Incentive claim is a significant undertaking — and one that requires careful preparation. The incentive offers businesses a cash refund of up to 43.5% of eligible R&D expenditure, but the registration and documentation requirements are demanding, and the ATO’s review activity in this area has increased substantially. This practical guide walks through each step of a first-time R&D claim, from initial eligibility assessment through to AusIndustry registration and lodgement of the company tax return.
Step 1: Confirm Your Eligibility
To claim the R&D Tax Incentive, your company must be an Australian incorporated company (or a foreign company incorporated in a listed country with Australian activities), conducting eligible R&D activities in Australia. Eligible activities must involve experimental work aimed at generating new knowledge, with a genuinely uncertain outcome. Activities that are routine, commercially predictable, or done purely for market research or quality control do not qualify. Before investing time in documentation, engage a specialist R&D accountant to conduct a preliminary eligibility assessment — this will confirm whether your activities are likely to qualify and what proportion of your expenditure may be claimable.
Step 2: Understand the Registration Deadline
Registration with AusIndustry (the Department of Industry, Science and Resources) is mandatory and must be lodged within 10 months of the end of your company’s income year. For a standard 30 June year-end, the deadline is 30 April the following year. Missing this deadline means forfeiting the claim for that year — there are no extensions available. Given the time required to prepare a quality registration, it is strongly advisable to begin the process well before the deadline, ideally in the September to December quarter following your year-end.
Step 3: Identify and Document Your R&D Activities
The registration form requires you to describe each R&D activity in detail, including: the new knowledge or capability being sought, the technical uncertainty that exists and why it cannot be resolved through existing knowledge, the experimental approach being taken, and the results observed (including failed experiments). This documentation must be created contemporaneously — meaning records must be made at the time activities are conducted, not reconstructed after the fact. For a first-time claimant, this is often the most challenging step: many businesses have conducted eligible activities without maintaining adequate records.
Step 4: Calculate Your Eligible Expenditure
Eligible R&D expenditure includes wages and salaries of employees directly engaged in R&D activities (including an apportionment for employees who split their time between R&D and other work), contractor fees for R&D work, materials consumed in R&D experiments, and overhead costs directly attributable to R&D. Each category requires specific calculations and, in the case of salary apportionments, documentation of the basis on which the split was determined. A common mistake is either overclaiming (including costs not directly related to eligible activities) or underclaiming (failing to include all allowable cost categories).
Step 5: Lodge the AusIndustry Registration
The AusIndustry registration is lodged online through the Business.gov.au portal. It requires a detailed description of each R&D activity, the dates during which the activities were conducted, and the estimated total expenditure on eligible activities. Once submitted, AusIndustry may request additional information or conduct a review of the registration. Having well-prepared, detailed documentation significantly reduces the likelihood of a registration being challenged.
Step 6: Include the Claim in Your Company Tax Return
Once the registration is approved, the eligible R&D expenditure and the resulting tax offset are included in the company’s income tax return. The R&D tax offset is calculated on the schedule and flows through to the return as either a refundable or non-refundable offset, depending on the company’s aggregated turnover. For companies with turnover under $20 million, any excess offset after reducing tax payable to nil is refunded in cash — making this one of the few Australian tax incentives that can generate a cash payment for a loss-making company.
Expert R&D Tax Incentive Advice From Quantum House
Quantum House are specialist R&D Tax Incentive accountants. We assist businesses with first-time and repeat claims across technology, construction, medical, and manufacturing sectors — including software development companies. We manage the entire process from eligibility assessment to AusIndustry registration, expenditure calculation, and tax return lodgement — with documentation designed to withstand ATO review. If you believe your business may have eligible R&D activities, contact Quantum House today for an obligation-free initial assessment.
Ready to talk? If you would like to discuss any of the topics covered in this article for your business, contact Quantum House today for a confidential consultation. Visit quantumhouse.com.au or call our Sydney office to speak with a senior adviser.