22 min read

Research and Development Tax Incentive - Australia

The Australian government introduced a research and development tax incentive scheme in 2017.

Tim Davidson
Tim Davidson

The Australian government introduced a research and development tax incentive scheme in 2017. The purpose of the scheme is pretty clear. The government wants to encourage companies to innovate.

If you’re working in a company that’s staring down the barrel of a big tax bill then this scheme could be the perfect opportunity to invest in an innovative application that helps add weight to the bottom line.

Under this scheme, companies making less than $20 million in annual revenue can claim a tax break of 43.5% on investments over $20,000. If the offset exceeds the company’s annual tax liability, the difference is paid out in cash.

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    Of course, there are criteria to meet before your innovation qualifies for the scheme:

    • R&D activities must be registered with the Department of Industry, Innovation and Science before the tax offset is claimed
    • The Department of Industry Innovation and Science have the last say on whether the money your company has invested in the project qualifies for the tax offset.
    • Your company is an Australian and legally incorporated or is foreign but registered to pay tax in Australia
    • R&D activities happen in Australia
    • The outcome of the R&D activities is aimed at generating new knowledge, products, processes or services and is generally based on scientific methods

    There are plenty of fields where the research and development scheme could be leveraged, but since we’re a software development company, that’s the context we’re writing in. To that point, there are a few activities that don’t count as R&D:

    • Developing software for internal company use
    • Money paid by a development agency to their staff to build products
    • Money paid by a company to an affiliated development agency where they get a kickback

    These rules are pretty vague, but there’s a bit more detail to dig through on the business.gov.au site.

    This is the kind of scheme where talking to an accountant upfront is going to help guide you through the entire process.

    As a domestic software agency, we can help you build your innovation. We’ve indirectly worked with the Canberra Innovation Network to help bring the Selectr project to life.

    If you’d like to have a chat about your application and what the development process looks like, please drop us a line!

    Written by
    Tim Davidson

    Tim Davidson

    Tim is the face of the company. When you want to kick off a new project, or an update on your existing project, Tim is your man!

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