How accountants can review an R&D claim with confidence

Introduction

Reviewing a research and development (R&D) tax incentive claim is one of the most high-stakes tasks an accountant can face. The claim can deliver a significant cash injection to a client’s business, but it also sits squarely under the scrutiny of the Australian Taxation Office (ATO) and AusIndustry. A confident review requires more than a cursory tick‑and‑flick; it demands a methodical assessment of eligibility, expenditure, record keeping, and lodgment obligations. As a registered tax agent, you are the gatekeeper who ultimately signs off on the claim, and the business owns that claim. Getting it wrong can mean repayment demands, penalties, and reputational damage. Getting it right, however, strengthens your client relationship and can transform their innovation pipeline.

This guide is not tax, financial, or legal advice. It is general information only, designed to help you structure your review process. Always confirm the details for the relevant income year with primary sources such as the ATO (ato.gov.au) and the Department of Industry, Science and Resources (business.gov.au), and ensure any claim you lodge complies with the Tax Practitioners Board’s professional standards. The approach described here reflects the division of responsibility we champion at GrantsMAX: an AI‑driven platform prepares an evidence‑backed application pack from your client’s own accounting data (read‑only), then you, the registered tax agent, review, refine, and lodge. The business owns the claim; neither GrantsMAX nor the AI lodges, guarantees, or files anything.

Prerequisites: What you need before you begin

Before you open the claim file, make sure you and your client are set up to work efficiently. This section covers the foundational knowledge, access, and expectations that underpin a smooth review.

Understanding the R&D Tax Incentive framework. You need current knowledge of the two‑part programme, administered jointly by AusIndustry and the ATO. AusIndustry assesses whether the activities constitute eligible R&D; the ATO administers the tax offset and oversees record‑keeping compliance. Familiarise yourself with the definitions of core and supporting R&D activities under the Industry Research and Development Act 1986, and the expenditure rules in the Income Tax Assessment Act 1997. The ATO’s online materials and AusIndustry’s guides are essential reading, and the ICAEW’s guidance on R&D tax credit services provides a helpful professional‑body perspective on review standards, albeit for a different jurisdiction, the principles of thorough checking translate well.

The accountant’s role in lodging. As the registered tax agent, you carry the professional responsibility for the claim you lodge. Even if a specialist consultant or AI platform like GrantsMAX prepares the pack, your review is not a rubber stamp. You must apply professional scepticism, verify the narrative, test the nexus between expenditure and activities, and ensure the claim complies with the law. Our Accountant Review & Lodge Workflow is built around this exact collaboration: the pack comes to you in a shared workspace, you review and refine, then you lodge. The business remains the claimant; you are the trusted lodgment professional.

Access to relevant data and tools. To review with confidence, you need:

• The client’s accounting records for the income year (GrantsMAX can connect read‑only to Xero, MYOB, or QuickBooks via the Browser connector);
• AusIndustry registration details (the registration number and date);
• The R&D plan or contemporaneous records that describe activities, hypotheses, observations, and conclusions;
• The draft claim schedule and supporting calculations; and
• Any previous ATO correspondence or review findings for the client.

If your client has never claimed before, the whole process can feel daunting, which is why we built GrantsMAX for first‑time claimants. It helps you show the client what they may be eligible for and prepares a draft pack that you can then put through this review checklist.

Pro tip: Bookmark the ATO’s R&D tax incentive homepage and AusIndustry’s business.gov.au grant pages. Rule changes and practical compliance guidelines are updated regularly. Before every review, check for any new rulings, taxpayer alerts, or law companion guides.

Step 1: Confirm the R&D activities are eligible

Eligibility is the foundation. If the activities do not meet the statutory definition, nothing else matters. Start by checking that each activity the client lists as R&D genuinely qualifies as either a core R&D activity or a supporting R&D activity under the applicable legislation.

Core R&D activities

Core R&D activities are experimental activities whose outcome cannot be known or determined in advance on the basis of current knowledge, information, or experience, and that are conducted for the purpose of generating new knowledge. The activity must follow a systematic progression of work that involves:

• Formulating a hypothesis,
• Designing and conducting an experiment,
• Observing results, and
• Drawing conclusions.

Simply improving a product or solving a routine technical problem does not, on its own, qualify. You need to see evidence of genuine experimentation and scientific or technological uncertainty. The ATO’s guidance emphasises that the activity must take place in Australia (with limited exceptions for certain overseas activities).

Supporting R&D activities

Supporting R&D activities are those directly related to core R&D activities, or that have been undertaken for the dominant purpose of supporting core R&D activities. Examples include developing a prototype for testing, or engineering work required to prove a concept. However, activities that are incidental, such as routine data collection or market research, are not supporting R&D. The nexus must be direct and substantial.

When you review the activity descriptions, ask:

• Is the scientific or technological uncertainty clearly articulated?
• Do the records show a systematic progression, or is this simply trial‑and‑error?
• Are there contemporaneous notes, emails, or meeting minutes that record hypotheses and results?
• Does any activity overlap with excluded activities (e.g., artistic creation, social science research, or work excluded by regulation)?

The BDO Research & Development Tax Credit Insights page highlights that across many jurisdictions, firms often see claims challenged when the narrative fails to pinpoint the specific knowledge gap, a common trigger for ATO reviews in Australia as well.

Warning: A company cannot claim for the same R&D activity in multiple income years unless it progresses the activity further. Ensure the client is not recycling the same description year after year without genuine advancement.

Step 2: Assess the nexus between expenditure and activities

Once you are comfortable that the activities are eligible, turn to the dollars. The R&D tax incentive allows a deduction or offset for notional R&D expenditure, but only if the expenditure has a direct nexus to the eligible activities. Break down every expense line item and match it to a specific core or supporting R&D activity.

Directly related expenditure

Eligible expenditure typically includes:

• Salary and on‑costs for employees who directly engage in R&D activities (you must be able to apportion time);
• Contract expenditure for R&D activities performed by an approved research institute;
• Consumables and materials that are transformed or substantially used during the R&D;
• Depreciation of plant and equipment used for R&D (subject to specific rules); and
• Certain overheads that can be apportioned on a reasonable basis.

The ATO expects that each cost is incurred “in carrying on” the R&D activity. If a widget is used partly for production and partly for R&D, you must apportion it. Generic percentages without supporting time records or usage logs will not stand up under review.

Excluded expenditure and apportionment

Watch for items that are expressly excluded, such as interest, expenditure on core technology, or costs of acquiring intellectual property. Also, expenditure incurred before a company registers its R&D activities with AusIndustry is generally not eligible. The law requires registration within 10 months after the end of the income year, but practically, registration should be in place before you lodge the claim.

This is where an automated tool can reduce manual checking. GrantsMAX for SMBs on cloud accounting reads the client’s accounting data and maps transactions to activity descriptions, so when you open the pack, you can trace every dollar from the general ledger to a line in the claim schedule. The Audit‑Ready Evidence Trail then indexes supporting documents, so you do not have to fish through emails to verify a single purchase.

Pro tip: The Mazars R&D tax credit claim process guide suggests building a reconciliation schedule that links each expense to a specific experiment or project milestone. While their guide addresses the UK system, the principle is sound in Australia and makes an ATO review far less stressful.

Step 3: Verify record keeping and contemporaneous evidence

The ATO will not accept a claim that relies on a post‑hoc narrative built long after the activities ended. Contemporaneous records are the strongest defence. As the lodging agent, you are responsible for satisfying yourself that the records exist and support the claim.

The importance of contemporaneous documentation

The Income Tax Assessment Act 1997 requires that an entity keep records that explain all transactions and are in English (or readily accessible and convertible to English). For R&D, this means records that show:

• The nature of the activities, how they were conducted, and why they constituted eligible R&D;
• The relationship between the expenditure and the activities;
• The calculations of apportionment; and
• The basis for claiming the R&D tax offset.

Acceptable records can include project plans, lab notebooks, design drawings, test results, email threads documenting hypotheses and outcomes, timesheets, and invoices. The ATO’s “Keeping records for R&D tax incentive” guide is essential reading.

The AICPA’s R&D tax credit resources offer a useful framework for evaluating documentation quality, they note that the best evidence is created at the same time the work is performed, and the same holds for Australian claims.

How GrantsMAX builds an audit‑ready evidence trail

Rather than asking your client to compile records from thin air, GrantsMAX connects read‑only to the business’s existing systems, Xero, MYOB, QuickBooks, Microsoft 365, and Google Workspace. It pulls timesheets, emails, invoices, and project files, then indexes them against each activity and cost line. The result is a structured evidence trail that you can walk through with your client. You do not have to become a detective; you verify that the evidence is consistent and complete.

Warning: If the client cannot produce contemporaneous records, consider whether the claim should proceed. A missing notebook from a critical experiment could lead to the ATO disallowing a significant portion of the claim, and your professional reputation would be on the line.

Step 4: Review the R&D tax offset calculation and registration status

With activities and expenditure validated, the next step is the calculation of the R&D tax offset and a check of administrative prerequisites.

Calculating the offset

The R&D tax offset is a percentage of eligible R&D expenditure. For income years commencing on or after 1 July 2021, the refundable offset for companies with aggregated turnover below $20 million is 43.5% (ATO, 2024). For companies with turnover of $20 million or more, the non‑refundable offset aligns with the company’s corporate tax rate plus a premium. These rates, thresholds, and definitions can change. Always verify the current rates on the ATO website and confirm the client’s aggregated turnover for the income year. Recent announcements have proposed raising the refundable‑offset turnover threshold, but at the time of writing, no legislation has been enacted. Treat any such proposal as exactly that, proposed, and tell your client you will reassess once Parliament passes any change.

Your review should include:

• A recalculation of total notional R&D expenditure from the general ledger;
• Confirmation that the client has correctly identified and excluded ineligible amounts;
• An apportionment check using actual records, not estimates of convenience;
• A calculation of the offset using the correct rate and the proper turnover test; and
• A determination of whether the offset is refundable or non‑refundable for the entity.

Checking AusIndustry registration and ATO lodgment

A company cannot claim the R&D tax incentive unless it has registered its R&D activities with AusIndustry. The registration must be made for each income year, and the activities described must correspond to those in the tax return. As part of your review, verify:

• The AusIndustry registration number and the registration date;
• That the registered activities match the activities claimed (if a project was registered but never carried out, adjust accordingly); and
• That registration occurred within the required timeframe (generally 10 months after year‑end).

If a client has undertaken R&D but missed the registration window, they may lose the benefit for that year. As the lodging tax agent, you should confirm with your client that the registration is in place before you lodge the company tax return.

The IRS Credits & Deductions hub and the CRA federal R&D tax credit overview both illustrate how other countries similarly tie the credit to timely registration, underscoring that administrative deadlines are universally rigid.

Pro tip: Put a diarised reminder in your client management system to check AusIndustry registration 60 days after the client’s year‑end. This catches any administrative oversight before the deadline passes.

Step 5: Review the overall narrative and consistency

The final review step is a holistic assessment. Even if every activity, dollar, and document checks out in isolation, the claim must tell a coherent story that aligns with the client’s business operations.

The accountant’s professional judgment

As the lodging tax agent, you bring an independent perspective. Ask yourself:

• Does the R&D narrative align with what you know about the client’s industry? For a manufacturing client, does the claim reference genuine production‑floor challenges, or does it read like a generic consultant’s template?
• Are the claimed activities consistent with the client’s size, resources, and revenue? A micro business claiming a multi‑million‑dollar R&D expenditure may attract immediate ATO scrutiny.
• Is there any overlap with non‑R&D project work? If a software developer claims 100% of their time on R&D, but they also handled client support and bug fixes, the apportionment is likely overstated.
• Have you discussed the claim with the client’s technical lead or project manager? A 30‑minute conversation can reveal whether the records reflect reality.

GrantsMAX prepares the pack from data, but your judgment is what turns data into a defensible claim. For technology companies, our GrantsMAX for technology companies page explains how the platform structures narrative and substantiation specifically for software and product engineering, where the dividing line between routine development and R&D can be blurry.

Common red flags and pro tips

• Red flag: The R&D description is vague, using phrases like “innovation” or “world‑leading” without identifying a specific technical uncertainty. Pro tip: Ask the client to restate the activity in plain English: “We didn’t know if X would work because Y had never been attempted, so we tested it by doing Z.”
• Red flag: Timesheets or records were created in a single batch, long after the work was done. Pro tip: If contemporaneous records are weak, you can still undertake additional interviews and document a thorough review, but be transparent with the client about the higher risk.
• Red flag: The claim includes expenditure that is clearly excluded (e.g., interest, or costs related to an asset that is also used for production, with no reasonable apportionment). Pro tip: Remove or re‑classify these items, and note your adjustment in your working papers. The ATO expects the tax agent to have corrected obvious errors.
• Red flag: The client has received an AusIndustry finding that the activities are not eligible, yet still wants to include them. Pro tip: AusIndustry’s determination is binding. Do not lodge a claim that contradicts it.

The Grant Thornton UK insights library contains several articles on R&D tax relief risk that, while written for the UK, reinforce the importance of narrative consistency and the dangers of boiler‑plate claims. Their advice on telling a “story” of genuine technical endeavour aligns with Australian ATO expectations.

For a manufacturing client, you might also want to look at our GrantsMAX for manufacturers page, which highlights how process improvement and automation projects can be cast as eligible R&D, but only when the records capture the iterative experimentation.

Pro tip: Before finalising, read the entire claim as if you were an ATO reviewer. If any paragraph feels too generic or unsupported, flag it for revision.

Conclusion and key takeaways

A confident R&D claim review is not about finding reasons to say no; it is about ensuring that every element of the claim can withstand the scrutiny of the ATO and AusIndustry. As the registered tax agent, your systematic approach protects your client’s interests and your own professional standing.

Key takeaways from this guide:

• Eligibility first: Start by rigorously testing core and supporting R&D activities against the statutory definitions, using AusIndustry and ATO resources.
• Nexus is king: Every dollar claimed must trace directly to an eligible activity, with defensible apportionment.
• Contemporaneous records are non‑negotiable: Without them, the claim is vulnerable; your role includes verifying that adequate records exist and align with the narrative.
• Registration is a hard prerequisite: Confirm the AusIndustry registration number and timing before lodging.
• Your judgment adds the final lens: No software or consultant replaces your independent professional assessment.

GrantsMAX supports this review process by turning the client’s own accounting data into an evidence‑backed pack that lands in your lap structured and indexed. You then review, refine, and lodge, the business owns the claim, and you remain firmly in control. The platform does not lodge, guarantee outcomes, or replace the registered tax agent; it simply removes the time‑consuming, manual assembly work so that you can focus on what you do best: applying your professional expertise with confidence.

If you are curious to see how it works in practice, book a walkthrough with our team. During a 30‑minute call, we show you exactly how the platform connects to accounting data, discovers potential grants and R&D incentives, and prepares a pack ready for your review. Whether you work with startups, scale‑ups, or established exporters, you can get a head start on offering this service to your client base while staying fully compliant with your professional obligations.

This article is general information only and does not constitute tax, financial, or legal advice. You should confirm all rules, rates, and thresholds for the relevant income year with the ATO and AusIndustry, and ensure any claim you lodge complies with Tax Practitioners Board requirements.