Clinical trials and the R&D Tax Incentive

Clinical trials sit at the intersection of scientific discovery, strict regulation, and substantial financial commitment. For Australian businesses in pharmaceuticals, biotechnology, medical devices, and digital health, the costs of running a trial can quickly run into the millions. The Research and Development Tax Incentive may offset a portion of those costs, but only if the activities, evidence, and structure meet the program’s definitions.

This guide walks through how clinical-trial activity can be framed as core or supporting R&D activities under the incentive, what substantiation the ATO and AusIndustry expect, and the critical role that ethics, regulatory, and accounting records play. It is general information only, not tax, financial, or legal advice. Every business’s circumstances are different, and you should confirm your position with a registered tax agent who understands the R&D Tax Incentive. Always check the current income year rules with the Australian Taxation Office and AusIndustry, because program details can change.

GrantsMAX does not lodge or maximise your claim. It prepares an evidence-backed application pack from your own accounting data, which your registered tax agent reviews, refines, and lodges. You own the claim throughout.

Prerequisites for considering clinical trials under the R&D Tax Incentive

Before you assess individual trial activities, you need a few foundations in place. Skipping these can lead to a claim that fails review or an ATO audit.

You understand the basic structure of the R&D Tax Incentive

If you are new to the incentive, start with the plain-English guide published by GrantsMAX. The program, jointly administered by AusIndustry and the ATO, offers either a refundable or a non-refundable tax offset for eligible R&D expenditure. The core concepts, core R&D activities, supporting R&D activities, notional deductions, and the registration process, underpin every claim. For many clinical-trial sponsors, the refundable offset is particularly relevant if aggregate turnover is under $20 million (and a proposed reform may lift that threshold to $50 million, but it is not yet law).

Your trial has the necessary ethics and regulatory approvals

Clinical trials in Australia must comply with the National Health and Medical Research Council’s National Statement on Ethical Conduct in Human Research and, where applicable, the Therapeutic Goods Administration’s (TGA) clinical trial notification (CTN) or clinical trial approval (CTA) schemes. A trial that lacks ethics approval or TGA notification is unlikely to be considered a genuine research activity. AusIndustry and the ATO expect to see evidence of these approvals as part of your supporting documentation. For more on trial registration and transparency, the National Institutes of Health’s ClinicalTrials.gov registry is a useful model, though Australian trials typically use the Australian New Zealand Clinical Trials Registry (ANZCTR).

Your accounting records are organised and read-only access for analysis is available

Because the R&D Tax Incentive relies on actual expenditure, your general ledger must clearly separate R&D costs from ordinary business costs. For clinical trials, this often means tracking site fees, investigator payments, data management costs, ethics committee fees, insurance, and drug or device manufacturing costs, all assigned to specific trial projects. GrantsMAX connects to Xero, MYOB, QuickBooks, Microsoft 365, or Google Workspace (read-only) to pull that data and begin building the cost structure. You then hand the prepared pack to your accountant.

Step 1: Classify each clinical-trial activity as core or supporting R&D

The Industry Research and Development Act 1986 defines core R&D activities as experimental activities whose outcome cannot be known or determined in advance on the basis of current knowledge, and which are conducted for the purpose of generating new knowledge. Clinical trials often involve experimental treatments, novel devices, or repurposed drugs, where the hypothesis being tested meets that uncertainty threshold. However, routine data collection or standard-of-care comparisons may not.

Core activity candidates in a clinical trial

• Investigational product administration: If the drug, device, or biologic is new or being used in a novel indication, the administration protocol itself can be a systematic experiment.
• Dose-ranging or pharmacokinetic studies: Testing multiple dosing regimens to find a safe and effective therapeutic window is inherently experimental.
• Exploratory biomarker analysis: When you are analysing blood or tissue samples to discover a novel predictive biomarker, that is new knowledge generation.
• Adaptive trial design components: Statistical modelling and real-time design modifications that are themselves innovative can be core R&D.

Supporting activity candidates

Supporting activities are those directly related to core R&D activities. In the clinical-trial context, examples include:

• Data management and statistical analysis (if undertaken for the dominant purpose of supporting the core experimental activities)
• Project management of the trial (scheduling, site coordination, monitoring visits)
• Ethics submission preparation and regulatory document drafting
• Investigator meetings and training on the investigational product
• Manufacture of trial-related materials (investigational product, placebos) for the purpose of the trial

Pro tip: Document the scientific purpose of each activity at the time it happens. A contemporaneous note explaining why a particular data-collection step was necessary to test a hypothesis is far stronger than a retrospective justification written during claim preparation.

Where businesses get tripped up

Many trial sponsors wrongly assume that all trial costs are automatically eligible. Phases of routine clinical care, commercial market research, or post-approval surveillance studies are unlikely to satisfy the core activity definition. Similarly, activities that are primarily regulatory compliance (such as routine annual safety reports) may not be eligible unless they are integral to the experimental work. When in doubt, check whether the activity passes the “but for” test: would you have performed this activity if the experimental trial hypothesis did not exist?

Step 2: Isolate the eligible expenditure for each activity

Once you have classified activities, the next step is to identify the associated expenditure that is eligible for the R&D tax offset. The ATO’s Research and development tax incentive guidance sets out what can be included: employee wages, contractor payments, consumables, depreciation on assets used in R&D, and certain other costs, but only to the extent they are incurred on eligible R&D activities.

For clinical trials, common cost areas include:

• Clinical research organisation (CRO) fees: Invoices from a CRO that specify the scientific tasks (e.g., “Phase I dose-escalation study management”) can be claimed as contractor expenditure. Generic statements like “trial management” may invite scrutiny.
• Site payments: Payments to hospitals or clinics for trial conduct. Break these down into per-patient costs and start-up fees; only the portion attributable to the experimental intervention and related data collection is potentially eligible.
• Laboratory and bioanalytical services: Costs for pharmacokinetic blood draws, biomarker assays, and genetic sequencing are often closely tied to core activities.
• Internal staff time: Clinical operations managers, data managers, biostatisticians, and medical monitors who are Australian-based and spend substantial time on trial R&D should have timesheets that capture R&D versus non-R&D hours.

Warning: Do not double-count costs. If you receive a grant or subsidy (e.g., an NHMRC or MRFF grant) that partially offsets a trial cost, that amount must be excluded from your R&D claim to the extent it is a reimbursement. Likewise, costs that give rise to a capital asset (such as bespoke lab equipment retained beyond the trial) may need to be depreciated rather than fully expensed.

GrantsMAX does not determine which costs are eligible; it drafts a cost structure from your Xero files and maps invoices to your activity descriptions. Your registered tax agent then reviews, adjusts, and finalises the numbers before lodgment.

Step 3: Build a contemporaneous evidence trail that mirrors the regulatory record

The single biggest compliance risk for a clinical-trial R&D claim is a gap between the scientific record and the financial record. Regulators and the ATO want to see that the expenditure claimed matches the experimental activity undertaken, and that both are supported by documents created at the time.

Using the regulatory docket as evidence

Your trial master file, ethics committee correspondence, and TGA CTN/CTA forms already contain a wealth of contemporaneous evidence. For each core activity you describe in the claim, link it directly to:

• The approved protocol version and the date ethics approval was granted
• The investigator brochure or scientific rationale that frames the knowledge gap
• The statistical analysis plan that outlines the hypothesis being tested
• Minutes of investigator meetings where the scientific methodology was debated
• Serious adverse event reports (to demonstrate that monitoring was integral to the experiment)

These documents do not need to be submitted with the claim, but they should be referenced in a clear index that ties them to cost lines. GrantsMAX’s audit-ready evidence trail function builds an index across your emails, invoices, and timesheets, connecting each activity and cost to its source. This is handed to your accountant as part of the pack.

Proving “dominant purpose” for supporting activities

A supporting activity must have a dominant purpose of supporting the core R&D. For example, a data manager may spend 60% of their time on validation tasks that are necessary because the trial protocol involves a novel endpoint. A timesheet that shows 60% of hours coded to “R&D-endpoint validation” and 40% to “general data cleaning” provides a contemporaneous allocation that can be reviewed by an ATO auditor. Likewise, CRO invoices that separately itemise “biostatistical modelling for adaptive interim analysis” are stronger than a single monthly fee.

Step 4: Link ethics, regulatory context, and uncertainty to strengthen the activity description

One of the most effective ways to show that a clinical trial involves “experimental activities whose outcome cannot be known in advance” is to articulate how the trial answers an unresolved scientific question. The ethics and regulatory context does exactly that.

What makes a trial experimental?

An ethics committee approves a clinical trial only when it finds that the intervention is being tested under a valid hypothesis, that there is equipoise (genuine uncertainty about the outcome), and that the methodology is scientifically rigorous. By referencing the ethics approval letter and the rationale section of the protocol, you can demonstrate that the trial meets the statutory uncertainty requirement. This is especially helpful in submissions to AusIndustry, as it anchors the claim in an independent, pre-existing assessment of scientific merit.

Regulatory pathways as evidence of R&D

• CTN scheme: The TGA accepts a notification from the human research ethics committee. This process confirms that the trial involves an unapproved therapeutic good or an approved good used in a new way, a strong indicator of experimental activity.
• CTA scheme: The TGA itself evaluates the safety and scientific validity of the trial. An approved CTA explicitly signals that the trial is investigating a new use or formulation.

When you describe a trial’s core activities, include a brief reference to the regulatory pathway and the ethics approval date. This is not legal or tax advice; it is a factual piece of context that demonstrates the activity is conducted according to a recognised research framework.

Step 5: Work with a registered tax agent who understands clinical-trial R&D

Even the most meticulously prepared evidence pack is not a claim until a registered tax agent reviews and lodges it. The Tax Practitioners Board mandates that only a registered agent can prepare and lodge R&D tax incentive claims on behalf of a taxpayer. This is why GrantsMAX never lodges; it simply prepares a draft pack from your accounting data and supporting records. From there, the agent’s role is critical:

• Review the R&D activity description: Confirm that it reflects what actually happened and meets the legislative definitions.
• Validate cost allocation: Check that labour, contractor, and consumable costs have been apportioned reasonably, and that adjustments (e.g., for grants or non-R&D use) are correctly applied.
• Assess cross-border issues: If parts of the trial were conducted overseas, the agent will assess whether advanced overseas finding requirements apply, or if you need to limit the claim.
• Sign off and lodge: The agent lodges the claim alongside the company tax return, retaining the working papers in case of review.

The Accountant Review & Lodge Workflow in GrantsMAX creates a shared workspace where the agent sees exactly which source documents back each line item. The platform tracks the claim from Draft to Review to Lodged, with the agent in control at every step. This is particularly useful when a single accounting firm handles multiple biotech clients, because the Annual Refresh & Accountant Channel allows them to white-label the process and update claims each year with fresh data.

Pro tip: If you do not already have a tax agent experienced in R&D claims, seek one who has handled clinical-trial clients. Ask whether they have navigated AusIndustry reviews that dug into trial protocols, CRO contracts, or site investigator fees. Their familiarity with the clinical research environment can make a material difference in how confidently they can present your claim.

Step 6: Prepare for a potential AusIndustry or ATO review

Clinical-trial claims are not immune from scrutiny. The ATO and AusIndustry have joint compliance programs that examine R&D tax incentive claims in detail. For trial sponsors, reviews often focus on:

• Whether the trial meets the definition of a core experimental activity, rather than routine data gathering or standard therapy delivery.
• Whether the costs claimed correspond to the activity described, and whether allocations are reasonable.
• Whether the dominant purpose test is satisfied for supporting activities.

A well-structured evidence index, like the one GrantsMAX builds from your own documents, can help your tax agent respond efficiently. The Eligibility Assessment & Risk Flags feature also highlights areas a reviewer might probe, so you and your agent can pre-emptively address them before lodgment.

But remember: no software or service can guarantee an audit will not happen or that your claim will be accepted. That outcome depends on the specific facts, the quality of your evidence, and the professional judgement of your registered tax agent.

How GrantsMAX fits into a clinical-trial R&D claim

GrantsMAX was built to reduce the administrative friction that keeps trial sponsors from filing a claim. It does not give tax advice, and it does not lodge. What it does is:

• Connect to your Xero, MYOB, or QuickBooks account (read-only) to surface eligible expenditure.
• Scan for relevant government grants and the R&D Tax Incentive, presenting what you may be eligible for.
• Draft activity narratives built around your trial protocols and real-world activities, using the scientific language needed for AusIndustry.
• Assemble a supporting-evidence index that ties ethics approvals, CRO invoices, timesheets, and regulatory documents to cost lines.
• Hand the complete pack to your registered tax agent via a shared workspace for review, refinement, and lodgment.

For small biotechs that are first-time claimants, the first-time claimant pathway is designed to demystify the process. Instead of starting with a blank document, your accountant receives a draft that reflects your actual trial activities, pulled from your own records. For technology-driven clinical-trial platforms that may also be developing novel software for trial analytics, the technology company overview explains how the software development itself can be captured.

And because grants and R&D incentives repeat each year, the Annual Refresh keeps the claim up to date with the latest trial data, so you are not starting from scratch next time.

Summary and key takeaways

Clinical trials and the R&D Tax Incentive can align well when the trial involves genuine experimental activity to resolve a scientific uncertainty, and when the evidence to support that claim is built as the trial progresses. Here are the main points to remember:

• Classify each activity as core or supporting based on the statutory definitions in the Industry Research and Development Act 1986.
• Isolate eligible expenditure carefully, ensuring costs are attributable to the experimental work and not double-counted.
• Build a contemporaneous evidence trail that links the trial protocol, ethics approvals, regulatory notifications, CRO invoices, and staff timesheets directly to the claim’s cost lines.
• Use the ethics and regulatory context to demonstrate uncertainty: an ethics committee’s approval signals that a hypothesis is being tested.
• Always have a registered tax agent review and lodge the claim. Never attempt to lodge an R&D claim yourself unless you are a registered agent.
• Understand that compliance reviews are possible; a defensible pack prepared from your original data gives your agent the best foundation.

This article is general information and does not take into account your specific business or clinical-trial circumstances. Tax rules, thresholds, and program details can change from year to year. Before acting, confirm the current position with the ATO, AusIndustry, and a registered tax agent.

If you run a clinical trial in Australia and want a more efficient way to prepare the R&D evidence pack so your accountant can review and lodge it, join the GrantsMAX waitlist. We will show you how it works, using your own Xero or other accounting data, with no obligation.