What you need to know about the R&D Tax Incentive
What you need to know about the R&D Tax Incentive
This article was originally published in March 2024. It was updated in April 2025 to reference the current challenges and opportunities facing the Australian agricultural industry, and to update the deadline for registering R&D activities for the year ending 30 June 2024 to 30 April 2025.
Research and development (R&D) is rooted in solving problems and capitalising on new or emerging opportunities. The Australian agricultural industry continues to face varied challenges such as fluctuating rainfall, volatile commodity prices, biosecurity threats and reliably unreliable export market conditions, compounded by the escalating global trade tariffs. At the same time, there are great opportunities to meet production and environmental targets through innovations like feed additives, fertiliser alternatives and interesting emerging technology like precision fermentation.
To support these efforts, the Australian Government offers the R&D Tax Incentive. This program incentivises companies to undertake R&D activities they might not otherwise commit to due to uncertain outcomes. Given the diverse challenges and opportunities within the agricultural industry, the program merits serious consideration for those looking to invest in developing new or improved products, processes, materials, services or devices.
In this article, our R&D Tax experts unpack what you need to know about the R&D Tax Incentive for agribusinesses.
The benefits of the R&D tax incentive
The benefits a company gains from claiming eligible R&D activities are determined by its aggregate turnover, which includes any connected or affiliated entities. Specifically:
- Aggregate turnover less than $20 million: The refundable R&D tax offset for applicable companies is the corporate tax rate plus an 18.5 per cent premium
- Companies with an annual aggregated turnover of less than $20 million can receive a refundable R&D offset of 43.5 or 48.5 per cent for expenditure incurred on eligible R&D activities, with the incentive component being 18.5 per cent above the prevailing corporate tax rate (25 or 30 per cent).
- Aggregate turnover of $20 million or more: The non-refundable R&D tax offset for applicable companies is their corporate tax rate plus an incremental premium. The premium increment is based upon the ‘intensity’ of the company’s R&D expenditure as a proportion of total expenditure for the year
- Under 2 per cent: If the company’s R&D intensity (calculated from R&D expenditure over total company expenditure) is up to 2 per cent, the tax offset will be equal to the company tax rate plus an 8.5 per cent premium
- Over 2 per cent: Where the company’s R&D expenditure is above 2 per cent, the offset will be equal to the company tax rate plus 16.5 per cent.
It is important to note that to obtain this benefit, potential claimants must spend more than the minimum R&D expenditure threshold of $20,000 in the financial year.
R&D activity eligibility
The definition of ‘eligible R&D activities’ for tax purposes is broad, however, the company must be undertaking a core R&D activity to claim the R&D offset. Under the legislation, a core R&D activity is an experimental activity:
- Where the outcome cannot be known or determined in advance based on current knowledge, information, or experience, but can only be determined by applying a systematic progression of work based on the principles of an established science
- That is conducted for the purpose of generating new knowledge (in the form of new or improved materials, products, devices, processes, or services, etc.).
Any other activity that has a direct link to ‘core’ R&D activities but does not involve experimentation or new knowledge development (e.g. preliminary research) can be eligible to support R&D activities.
Registration of R&D activities
If a company wishes to claim an R&D tax offset within its tax return, it must first register its R&D activities with AusIndustry. This application must be lodged within ten months of the end of the financial year in which the R&D activities were conducted. For example, for the year ending 30 June 2024, the activities need to be registered by 30 April 2025.
Requirements specific to the agricultural industry
- Corporate structure: Generally, only companies are eligible for the benefit. Trusts and individuals are not considered to be eligible entities
- Guidance on whole of farm claims: R&D claims for whole farms are not viewed favourably by the administrators of the program, given this indicates a lack of technical uncertainty and systematic progression of work
- Importance of documentation: It is crucial to appropriately document the R&D activities undertaken, as well as the expenditure incurred on those activities
- On behalf provisions: R&D activities be undertaken, to a significant extent, for the R&D entity. This weighs up who owns the resulting intellectual property or know-how arising from R&D activities, who controls the direction of the R&D activities and who bears the financial burden of the R&D activities
- Payments to associates:Where costs are incurred to associates, amounts must be paid and not just incurred.
How BDO can help
BDO Tax experts specialising in R&D and Government Incentives have extensive experience in successfully preparing applications and obtaining R&D benefits.
The R&D Tax Incentive registration deadline of 30 April 2025 for the year ending 30 June 2024 is fast approaching. Contact us today to learn how we can support your agribusiness with the R&D Tax Incentive.