How the R&D tax offset is claimed in your company tax return

This article is for general information only and does not constitute tax, financial, or legal advice. You should confirm all details with a registered tax agent or the ATO before lodging your return.

Every Australian company that undertakes eligible research and development may be able to claim the R&D tax offset, a benefit that can meaningfully reduce the tax you pay or even generate a cash refund. But the offset does not appear out of nowhere, it is embedded in your company tax return, and the process to put it there matters as much as the R&D work itself. This guide walks through exactly how the R&D tax offset is claimed in your company tax return, step by step, so you understand where your accountant’s work fits and what you need to have ready beforehand. Along the way, we will mention how tools like GrantsMAX help prepare the evidence-backed pack your registered tax agent reviews and lodges, making the journey smoother for first-time and experienced claimants alike.

If you are new to the R&D Tax Incentive, a good starting point is our plain‑English guide What is the R&D Tax Incentive?. It covers eligibility, the difference between core and supporting activities, and the overall claim lifecycle. Once you have that foundation, the steps below will show you how the offset finds its way into your company tax return.

Prerequisites: What you need before you claim

Before a registered tax agent can lodge a company tax return that includes an R&D tax offset, four things must be in place:

1. AusIndustry registration for the income year in question.
2. Eligible R&D expenditure calculated and backed by solid records.
3. A registered tax agent who will review, prepare the R&D schedule, and lodge the return.
4. Access to your accounting data so you can collate and justify the figures (this is where GrantsMAX’s read‑only browser connector becomes valuable).

Missing any of these will mean the ATO either rejects the offset claim or, worse, issues an amended assessment later. Let us unpack each.

AusIndustry registration

The R&D Tax Incentive is jointly administered by AusIndustry (part of the Department of Industry, Science and Resources) and the ATO. Regardless of how your R&D expenditure is calculated, you must first register your R&D activities with AusIndustry. The registration deadline is 10 months after the end of your income year-for most companies with a 30 June year‑end, that means registration by 30 April of the following year. The official business.gov.au overview of the R&D Tax Incentive states this clearly and explains the online registration process. Registration is not the claim itself; it is the prerequisite that allows you to then lodge the offset in your tax return.

Pro tip: Even if you intend to use a registered tax agent to calculate the offset, ensure the AusIndustry registration is completed in your company’s name well before you sit down to finalise the return. Late registration can only be obtained in very limited, exceptional circumstances.

Eligible R&D expenditure and documentation

You can only claim the offset for eligible expenditure incurred on core R&D activities and supporting R&D activities. Typical expenses include salaries and wages of R&D staff, consumables, contractor costs, and depreciation on equipment used in R&D. The ATO’s steps for claiming the R&D tax offset describe the types of expenditure that can be claimed and remind you that the total expenditure must be reduced by any recoupment amounts (such as government grants you may have received for the same activities).

Crucially, you need to retain documentation that proves:

• The activities were undertaken and the expenditure was actually incurred.
• How the expenditure relates to specific registered activities.
• That the dominant purpose of supporting activities was to directly support the core R&D.

GrantsMAX’s discovery and matching tool helps you map your accounting data to potential R&D activities, but the detailed evidence, timesheets, lab notebooks, design specifications, project plans, ultimately comes from your operational records. The platform can pull those documents from the tools you already use through integrations with Microsoft 365, Google Workspace, SharePoint, Box, and Dropbox, making evidence collation far less manual.

A registered tax agent

You are legally required to lodge your company tax return, and by extension the R&D tax offset schedule, either yourself or through a registered tax agent. The ATO’s research and development tax incentive schedule instructions note that most companies use a tax agent because of the complexity. The agent is responsible for correctly applying the law, calculating the offset, and attesting that the return is accurate. They also lodge the return electronically using eligible software. Neither you nor your accountant can delegate the claim to a non‑registered party, hence GrantsMAX focuses on preparing the evidence and the draft claim pack, which the tax agent then reviews and lodges.

Warning: Do not assume that an accountant who prepares your BAS or financial statements is automatically authorised to lodge an R&D tax incentive claim. Only a registered tax agent with the appropriate experience should handle this. Always verify their registration with the Tax Practitioners Board.

Step 1: Confirm your AusIndustry registration is in order

Before any offset numbers appear in the tax return, your R&D activities for the relevant year must be registered and the registration active. Log into the AusIndustry customer portal (accessible through business.gov.au) and check:

• The registration covers the income year you are claiming for.
• The registration number (often called the “IRP number”) is recorded.
• The activities described match what your team actually performed.

If you lodged the registration months earlier but later refined the scope of your R&D activities, you may need to amend the registration. Inconsistencies between the registration and what appears in the tax return are a common trigger for ATO review. For technology companies, ensuring the narrative around software development aligns with the registered description is particularly important; our page for technology companies explains how GrantsMAX drafts narratives that tie directly to the registered activities.

At this stage, you should also confirm that no other government funding received for the same R&D activities (e.g., an Entrepreneurs’ Programme grant, a CRC‑P grant, or a state innovation voucher) would require a reduction of your R&D expenditure. The Grants and programs hub on business.gov.au lists all active federal and state programs, cross‑referencing can save you from an unintended over‑claim. GrantsMAX’s opportunities module keeps track of multiple grants so you can see how funding interacts before your accountant finalises the offset.

Pro tip: If your company is part of a group with another entity that registered the same R&D activities, ensure the registration is in the correct entity’s name. The ATO’s R&D tax incentive guide emphasises that each entity must separately meet the registration and expenditure requirements; you cannot simply split a single registration across multiple group companies.

Step 2: Prepare your R&D evidence and calculate eligible expenditure

Now the numbers come into focus. You need to total all eligible R&D expenditure for the year and categorise it according to the labels the ATO expects. This is not a job for guesswork; the ATO can request source records for any line item.

Collating eligible expenditure

Typical categories include:

• Salaries and wages, the amount attributable to R&D activities, often calculated by multiplying time spent on R&D by the employee’s total cost (including superannuation and on‑costs).
• Contract expenditure, payments to third parties for R&D services performed in Australia (or overseas in limited circumstances).
• Consumables and materials, items consumed or transformed during R&D.
• Depreciation, on plant and equipment used for R&D, calculated using the diminishing value or prime cost method.
• Overhead costs, a reasonable apportionment of overheads that directly relate to R&D, such as a portion of rent for an R&D lab.

GrantsMAX connects to your accounting data through its browser connector (Xero, MYOB, QuickBooks) and automatically pulls transactions that may map to these categories. It then applies heuristics to suggest which items are likely R&D‑related, building a draft cost structure. This is particularly useful for first‑time claimants who may not know where to start. However, a human, ideally your finance lead or CFO, must still review and validate every line before the pack goes to the registered tax agent.

Build the evidence pack

For each R&D activity, you need contemporaneous records that demonstrate:

1. The hypothesis or technical challenge you set out to solve.
2. The experimental or iterative process you followed.
3. The outcomes, including any changes in direction, failures, or success.

For software companies, commit logs from GitHub or GitLab, design documents in Notion or Confluence, and Jira tickets can all form part of the evidence. The GrantsMAX guide for R&D‑active startups shows how early‑stage ventures can map such records to core R&D activities. For manufacturers, engineering drawings, prototype iterations, and test reports serve the same purpose.

Pro tip: The ATO will not accept a vague narrative that merely says “we attempted to improve the product.” Tie every dollar to a specific activity. Using a tool like GrantsMAX to link expense transactions to design documents can create a clearer audit trail.

Calculate the notional offset

Once the total eligible expenditure is prepared, your registered tax agent will calculate the offset. The offset is a percentage of the aggregate eligible expenditure. For Australian companies with aggregated turnover of less than $20 million per annum, the offset is 43.5% refundable, meaning if the offset exceeds the company’s tax liability, the ATO refunds the difference. For turnover of $20 million or more, the offset is 38.5% non‑refundable, it can only reduce tax payable down to zero. These percentages are for illustrative purposes based on the ATO’s current guidance; you should check the current rates for the income year you are lodging, as they have changed in the past.

It is worth noting that the government has announced a proposed increase in the refundable offset turnover threshold from $20 million to $50 million, subject to legislation. Our analysis for growing companies discusses the practical implications of this proposed reform. However, until it is enacted, the existing thresholds apply. Your registered tax agent will calculate the correct offset based on the law in force at the time of lodgment.

Internationally, similar R&D incentives exist. In the United States, the R&D credit is claimed via Form 6765 and filed with the corporate tax return, much as the Australian offset is claimed via a schedule. Documents like the Bloomberg Tax analysis highlight common documentation hurdles that are universal, so the discipline you build for the Australian system will stand you in good stead if you ever expand operations overseas.

Step 3: Your registered tax agent calculates and prepares the offset schedule

The registered tax agent takes the expenditure figure you (or GrantsMAX) have collated, reviews the evidence, and prepares the Research and development tax incentive schedule. This schedule is a mandatory attachment to the company tax return. It requires:

• The AusIndustry registration number.
• A breakdown of aggregated turnover to determine whether the refundable or non‑refundable offset applies.
• The total eligible R&D expenditure for each activity.
• Any recoupment amounts (e.g., government grants received for the same expenditure).
• The calculated offset amount.
• An apportionment if the R&D was conducted in a joint venture or partnership.

Because the schedule sits within the income tax return, the agent must lodge it using the ATO’s electronic channels. The ATO does not accept a standalone R&D claim; it must be part of the full return. That is why the agent’s review is so critical, they will confirm that the expenditure qualifies under the applicable tax laws, not just under AusIndustry’s registration scope, and they will ensure the offset correctly interacts with other items in the return, such as tax losses, franking credits, and the small business income tax offset.

Warning: Never lodge a company tax return with a provisional offset figure and hope to amend it later. If the ATO believes the claim was not reasonably arguable, it can apply penalties. Your registered tax agent should be comfortable signing off before lodgment.

Step 4: Lodging the company tax return with the R&D tax offset

This is the moment when the R&D tax offset physically enters the system. The registered tax agent electronically lodges the full company tax return, including the R&D schedule, via the ATO’s practitioner lodgment service. The company tax return contains several labels that capture the R&D information:

• Item 13-Research and development tax incentive is the primary label, where the offset amount is entered. That amount flows through to the calculation of tax payable or refund.
• For refundable offsets, the offset can create a credit that triggers a refund; the refund appears at Label H-Refund of excess research and development tax offset (or related labels depending on the return version).
• Non‑refundable offsets are used to offset tax payable but cannot generate a cash refund on their own; any unused offset is carried forward as a future deduction or, in some circumstances, a tax loss.

The ATO’s steps for claiming the R&D tax offset page provides a detailed walk‑through of these labels, and your registered tax agent will be intimately familiar with them. After lodgment, the ATO will issue a notice of assessment (or amended assessment) within a few weeks, showing the final tax result that incorporates the offset.

What GrantsMAX does not do

It is important to understand the division of responsibility. GrantsMAX’s platform prepares a comprehensive, evidence‑backed claim pack from your accounting and operational data. But it does not lodge the tax return; it does not “file” the claim with the ATO, and it does not act as your tax agent. The platform’s outputs are handed to you and your registered tax agent, who reviews everything, makes any necessary adjustments, and then lodges the return. The business owns the claim at every stage. This separation is deliberate, it means the registered tax agent’s professional judgement remains at the centre of the process, and the ATO sees a claim that has been reviewed by a qualified practitioner.

What happens next?

The ATO’s processing time varies, but once the notice of assessment is issued, your company can expect any refund to be paid into its nominated bank account within 12 business days of the assessment. For non‑refundable offsets that reduce tax payable, the effect is immediate, you simply pay less tax. If the ATO decides to review the claim, it will typically contact the registered tax agent who lodged the return. That is why having a well‑organised evidence pack, such as the one GrantsMAX helps compile, can make the review process faster and less stressful.

Pro tip: After lodgment, do not relax your record‑keeping. The ATO has five years (in some cases longer) to conduct a review or audit. All evidence should remain accessible and clearly tied to the return that was lodged.

Step 5: Record keeping and post‑lodgment substantiation

The ATO’s compliance focus on the R&D Tax Incentive is intense. You must keep records for at least five years after the lodgment of the return. Those records, time sheets, project plans, laboratory notes, contracts, invoices, must demonstrate the link between the expenditure and the registered activities. The ATO’s guide to claiming the R&D tax incentive underscores that records must be contemporaneous; something written a year after the fact carries little weight.

GrantsMAX’s features include a document vault that connects to cloud storage platforms like SharePoint, Google Drive, and Box, so evidence can be indexed by activity and year. While GrantsMAX prepares the pack, your team should maintain the habit of regularly filing supporting documents into a structured repository throughout the year, not just at tax time.

Warning: A common compliance pitfall is claiming wages for employees who spent only a fraction of their time on R&D. The ATO expects a reliable and consistent method of estimating R&D time, such as timesheet records or project allocation logs. Back‑calculating from a total salary figure without contemporaneous evidence is risky.

How GrantsMAX fits into the claim process

For Australian businesses and the accountants who advise them, GrantsMAX acts as a bridging layer between the accounting system and the registered tax agent. Rather than starting each claim from a blank spreadsheet, the platform:

• Connects read‑only to Xero, MYOB, QuickBooks, Microsoft 365, Google Workspace, and file storage via the browser connector and integrations.
• Scans for potential R&D activities using the discovery and matching engine, which cross‑references your data with the government programs you may be eligible for.
• Drafts activity narratives and cost structures that link specific transactions to AusIndustry‑registered activities, then packages everything into a pack ready for review.

The pack is handed to your registered tax agent, who (as described in earlier steps) reviews, refines, and lodges the return. This workflow is especially helpful for:

• Technology companies where software engineering activities are often the bulk of the claim.
• R&D‑active startups that may not yet have a full‑time finance function.
• First‑time claimants who find the terminology and compliance daunting.
• Exporters who may be eligible for both the R&D Tax Incentive and the Export Market Development Grant and need to manage interactions between the two.
• Growing companies with turnover approaching the proposed $50M threshold that want to stay ahead of changes.
• Founders and CFOs who want to explore grant funding without paying large success fees to traditional consultants.

For accounting firms, the Accountant Channel allows practitioners to white‑label the evidence‑generation step and run it across their entire client base, while maintaining full control over the final tax position.

Note: All financial data accessed by GrantsMAX is read‑only. The platform never initiates transactions, modifies your accounting records, or files anything on your behalf. It exists purely to prepare the documentation your registered tax agent needs.

Summary: Key takeaways

1. The R&D tax offset is claimed inside your company tax return, not separately. It requires an AusIndustry registration first, then a schedule lodged with the return.
2. A registered tax agent must review and lodge the return. They calculate the precise offset, ensure legal compliance, and engage with the ATO if a review occurs.
3. Documentation is king. From timesheets to design documents, contemporaneous evidence is the only thing that will satisfy the ATO if they ask questions.
4. The offset percentages are not fixed forever. For the current income year, check the latest ATO guidance and confirm rates with your tax agent. Proposed reforms, such as lifting the refundable offset turnover threshold to $50M, may change the landscape.
5. Tools like GrantsMAX can make preparation dramatically easier, but they do not replace the tax agent. The platform equips the agent with a thorough, evidence‑backed pack, reducing manual collation and helping avoid structural errors.

If you would like to see how GrantsMAX prepares a complete, evidence‑backed pack from your own accounting data, ready for your registered tax agent to review and lodge, join the waitlist at GrantsMAX and we will be in touch. You can also book a 30‑minute walkthrough to see the platform in action. For any other questions, visit our contact page.