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What a tax credit is

The research and development tax incentive (RDTI) offers a tax credit at the rate of 15% of eligible R&D eligible expenditure or loss up to $120 million. It operates by offsetting tax to pay and in some circumstances it is refundable.

To claim the tax incentive, you must spend at least $50,000 a year on eligible R&D. You might be eligible if you spend less than $50,000 and use an approved research provider.

Receiving your R&D tax credit

When applying tax credits against your income tax liability, your R&D tax credits apply after imputation credits but before refundable tax credits. Your tax credits are used in the following order:

  1. Non-refundable tax credits
  2. Tax credits for supplementary dividends
  3. Imputation credits
  4. R&D tax credits from a previous tax year
  5. R&D tax credits from the current tax year
  6. Refundable tax credits

Any R&D tax credits that are leftover can be carried into your next income year.

If you are a company, you may only carry your R&D tax credits forward if you meet the shareholder continuity requirements.

R&D tax incentive guidance: receiving your tax credit (

Can you get a refund 

If you're a company doing eligible R&D, you may be able to get an R&D tax credit refund of up to $255,000. This equals $1.7 million of eligible R&D expenditure if you:

  • are in a tax loss position
  • are in a tax paying position but have surplus tax credits
  • satisfy the R&D tax loss cash-out corporate eligibility and wage intensity criteria
  • do not derive exempt income and are not associated with anyone who derives exempt income.

The Government is proposing to broaden the criteria for refundability in the 2020/21 income year so that more businesses can qualify.

R&D tax incentive guidance: refunding tax credits ( 

Wage intensity criteria

You must also satisfy the wage intensity criteria In order to satisfy this criteria, 20% or more of your labour costs must relate to R&D. If you are part of a group of companies, the wage intensity amount calculated for your group must be at least 20%.