R&D Tax Incentive Eligibility Explained (With Examples)
Eligibility for the R&D Tax Incentive is determined by whether your activities meet the legislative definition of R&D, not by your industry, company size, or revenue. This page explains what makes activities eligible, with practical examples.
Quick Eligibility Check
Answer five questions to get an initial indication of your R&D Tax Incentive eligibility.
What type of legal entity is your business?
The RDTI is only available to incorporated companies, not sole traders, partnerships, or trusts.
What is your estimated annual R&D expenditure?
This includes staff time, contractor costs, and materials used in R&D activities. The minimum to claim is $20,000.
What is your company's approximate annual turnover?
This determines whether you receive a refundable cash offset or a non-refundable tax offset.
Which best describes your R&D work?
Eligible R&D must involve genuine technical uncertainty and a systematic experimental approach, not just building something new.
Does your work primarily involve any of the following?
These activity types are excluded from the RDTI by statute, regardless of technical complexity.
Your activities show strong indicators of eligibility
Based on your responses, your company appears to meet the key RDTI criteria. A formal assessment would confirm this and identify the full scope of claimable activities and expenditure.
You may have eligible activities
Some of your activities may qualify, but further assessment is needed. Many companies underestimate what qualifies, or describe their work in ways that make it sound ineligible when it actually meets the criteria.
Your eligibility requires further review
Based on your responses, there are factors that may affect your eligibility. We recommend a brief consultation to explore your options.
Core R&D Activities
Core R&D activities must involve:
Experimentation
Activities conducted for the purpose of generating new knowledge (including new knowledge in the form of new or improved materials, products, devices, processes or services)
Technical Uncertainty
You're trying to resolve something that cannot be readily deduced by a competent professional in the field
Systematic Progression
Your activities follow a systematic progression of work based on principles of established sciences
All three criteria must be met.
For a detailed breakdown of each test, the statutory exclusions list, and how AusIndustry and the ATO assess activities at review, see our core R&D activity guide.
Once you have confirmed your activities qualify, see the claim process guide for next steps, or learn how an R&D consultant can help.
Supporting R&D Activities
Supporting R&D activities are those:
- Directly related to core R&D activities
- For the purpose of supporting core R&D
- Examples: prototyping, pilot plants, trial production
For a full explanation of the dominant purpose test, what costs can be claimed, and how supporting activities differ from core R&D in practice, see our supporting R&D activities guide.
What IS Eligible (Examples)
Here are specific examples with technical detail:
Software Development
✅ ELIGIBLE:
"Developing a new algorithm to improve recommendation accuracy by 20% where existing approaches failed to meet performance targets. Experimenting with different neural network architectures to resolve latency issues."
❌ NOT ELIGIBLE:
"Building a standard web application using established frameworks with no technical uncertainty."
AI and Machine Learning
✅ ELIGIBLE:
"Training custom language models to handle domain-specific language with unknown optimal architectures. Experimenting with data augmentation techniques to improve model performance under edge cases."
❌ NOT ELIGIBLE:
"Using OpenAI's API to integrate ChatGPT into a customer service chatbot."
For more on AI claims, see our AI and the R&D Tax Incentive guide.
Engineering
✅ ELIGIBLE:
"Designing a lightweight drone frame that must meet contradictory requirements (strength, weight, cost) where material selection is uncertain."
❌ NOT ELIGIBLE:
"Building a drone using off-the-shelf components following standard designs."
Data Science
✅ ELIGIBLE:
"Developing novel feature engineering approaches to predict customer churn where traditional features failed."
❌ NOT ELIGIBLE:
"Standard data analysis and reporting using established statistical methods."
What Does NOT Qualify for the RDTI
The following activity types are either excluded by statute or consistently rejected by the ATO in compliance reviews. If your work primarily involves any of these, it is unlikely to meet the core R&D activity definition.
Routine Software Development
Building applications using established frameworks, libraries, or platforms where the technical approach is known and the outcome is predictable. This is the most common disqualifying scenario for technology companies.
Market Research and Feasibility Studies
Consumer surveys, market testing, competitor analysis, and feasibility studies are explicitly excluded by statute, regardless of how technically sophisticated the analysis is.
Quality Control and Routine Testing
Testing to verify that a product or process meets a known specification is not R&D. Eligible testing must involve genuine uncertainty about whether the approach will work at all.
Commercially Proven Methods
Applying techniques that are publicly documented, widely used in industry, or that a competent professional in your field could readily implement does not constitute technical uncertainty.
Overseas R&D Without a Finding
R&D activities conducted outside Australia generally cannot be claimed unless you have obtained an advance overseas finding from AusIndustry. There must also be at least one core activity conducted solely in Australia.
Social Sciences, Arts, and Humanities
Activities in social sciences, arts, humanities, or economics are excluded by statute. The RDTI applies to experimental activities based on principles of natural or applied sciences.
Common Eligibility Mistakes
- Claiming routine software development
- Describing work in business outcomes rather than technical challenges
- Including activities with no genuine uncertainty
- Claiming work done by overseas contractors (limited eligibility)
- Including supporting activities with no core R&D
The 'Competent Professional' Test
A key test for technical uncertainty: Could a competent professional in your field readily deduce the outcome?
If the answer is 'yes', it's probably not eligible R&D.
If 'no', and you're experimenting to find out, it may qualify.
Frequently Asked Questions
Does software development qualify for the R&D Tax Incentive?
It can, but not automatically. Software development qualifies only if it involves genuine technical uncertainty that a competent professional in your field could not readily resolve. Developing novel algorithms, new machine learning architectures, or solving problems with no known solution can qualify. Building a standard application using established frameworks does not.
What is the minimum spend to claim the RDTI?
Your total eligible R&D expenditure must reach at least $20,000 in the income year. One exception applies: if your R&D is conducted through a registered Research Service Provider (RSP), the $20,000 minimum does not apply. Note that from 1 July 2028, the minimum threshold increases to $50,000.
Who is eligible for the R&D Tax Incentive?
Australian incorporated companies and foreign companies operating through an Australian permanent establishment under a double tax agreement. Sole traders, partnerships, and trusts are not eligible. The company must conduct qualifying core R&D activities and meet the minimum expenditure threshold.
Can I claim the RDTI if my company is in tax loss?
Yes, if your aggregated annual turnover is under $20 million, you receive a refundable offset. This means up to 43.5% of your eligible R&D expenditure comes back as a cash refund, even if your company has no tax payable. Companies with turnover over $20 million receive a non-refundable offset that reduces their tax liability instead.
What is the difference between core and supporting R&D activities?
Core R&D activities are the experimental activities that directly involve technical uncertainty, systematic progression, and the generation of new knowledge. Supporting R&D activities are those directly linked to core R&D that enable it to proceed, such as prototyping, pilot production, or technical testing. Both can generate claimable expenditure, but supporting activities cannot be claimed without corresponding core R&D.
What is the deadline to register R&D activities with AusIndustry?
You must register your R&D activities with AusIndustry within 10 months of the end of your income year. For a standard 30 June financial year, this means by 30 April the following year. This deadline is absolute. The ATO and AusIndustry have no discretion to grant extensions, and missing it means your claim is rejected entirely for that year.
More questions? See our R&D Tax Incentive FAQ →
Check Your Eligibility
Not sure if your activities qualify? Start with a structured assessment.
Contact Us for Eligibility Assessment