--- title: How the R&D Tax incentive works description: Claiming the R&D Tax Incentive is a two stage process. Here's how it works. --- [Skip to content](https://support.standardledger.co/knowledge/how-rd-tax-works-example-refund-calculations#main-content) ![](https://support.standardledger.co/hs-fs/hubfs/Standard%20Ledger%20Logo_RGB_transparent.png?height=40&name=Standard%20Ledger%20Logo_RGB_transparent.png) Open main navigation Close main navigation - [Contact us](mailto:support@standardledger.co) [Contact us](mailto:support@standardledger.co) Hi, how can we help you? - There are no suggestions because the search field is empty. 1. [Knowledge Base](https://support.standardledger.co/knowledge?hsLang=en) 2. [OUR R&D TAX INCENTIVE SERVICES (Australia)](https://support.standardledger.co/knowledge/our-rd-tax-incentive-services-australia?hsLang=en) # How the R&D Tax incentive works ## Claiming the R&D Tax Incentive is a two stage process. Here's how it works. > **💡Remember you must submit any claims by 30 April for the previous financial year** ### **The two stages are:** 1. Describing your R&D project/s in a registration submitted to AusIndustry 2. Claiming your eligible R&D expenses in a schedule as part of your tax return lodged with the Australian Taxation Office (ATO) You need you to keep records regarding both of these stages. ### **What does eligibility involve? ** You are likely to be eligible if you: - Are a company developing a unique, non-trivial software, hardware, engineered or manufactured product, process or service (i.e. it’s not just for software companies) - Can describe this as a series of experiments with unknown outcomes from which you have learned as you’ve progressed these developments - Have at least $20K of eligible expenses on R&D from the prior financial year **Eligible expenses include:** - Salaries of staff involved in R&D - Contractors involved in R&D and working inside Australia - Costs of equipment and operations related to R&D - Other direct costs such as R&D-related travel - Some indirect costs such as rent and utilities - Depreciation of assets used for R&D **Ineligible expenses include:** - Salaries of staff not involved in R&D - Contractors not involved in R&D or working outside Australia - Costs of equipment and operations not related to R&D - Legal and accounting costs - Marketing or advertising costs - Expenses on R&D from this financial year ### *How do you get the money?* Accessing the refund is two-step process: 1. 1. You need to describe your core and supporting R&D activities as a series of experiments in a registration to [AusIndustry](https://www.business.gov.au/grants-and-programs/research-and-development-tax-incentive); this will typically be approved by the Industry Innovation and Science Australia (IISA) board, but might be scrutinised by AusIndustry reviewers at some later date. Startup savvy R&D tax experts like Standard Ledger have lots of experience in preparing these registrations. 2. A summary of the eligible R&D spend is included as an R&D tax schedule in your tax return lodged with the [ATO](https://www.ato.gov.au/Business/Research-and-development-tax-incentive/); this might be scrutinised by ATO auditors. Startup savvy tax agents like Standard Ledger have lots of experience in preparing these schedules. If you’re an early-stage startup (under $20 million turnover), the R&D tax incentive is technically a refundable tax offset, meaning you can effectively cash out any tax losses rather than carrying them forward. - If you’re not yet profitable, and have enough tax losses, you will receive a 43.5% cash refund from the ATO. You can expect the ATO to clear your refund in four to eight weeks after lodging your tax return. - If you’re already profitable, and in a tax payable position, your R&D claim will reduce the tax that you’d otherwise be paying, but be aware that the benefit is a 16% one (the difference between the 43.5% R&D offset and small business company tax rate of 27.5% … yep it can get a bit technical!) If you're a typical early stage startup in pre-revenue development mode, and have **not** made a profit, on a $100,000 R&D spend the maths looks like this: | Your R&D spend | $100,000 | | --- | --- | | You claim 43.5% | $43,500 | |   |   | | LESS preparation fee | $3,500 | | Your net benefit | $40,000 | ### Record keeping In the current climate of increasing audits, you want to make sure your records are up to scratch. - For financial records, make sure you’re able to provide any underlying payroll details or copies of external contractor services you’ve used for R&D, for example. As part of Standard Ledger’s ongoing [bookkeeping services](https://www.standardledger.co/bookkeeping-and-accounting/) we include the [Receipt Bank App/email to “Snap n Send” your source invoices](https://support.standardledger.co/knowledge/how-do-i-email-/-snap-invoices-to-standard-ledger?hsLang=en); you’ll be ready with full documentation should you be faced with an ATO audit. - For evidence of R&D activities, you’re going to need to show how you identified and tracked the eligible R&D activities (as well as the basis under which those records have been used to determine the associated R&D spend). AusIndustry uses a wonderful phrase, [contemporaneous records](https://www.business.gov.au/grants-and-programs/research-and-development-tax-incentive#getting-it-right)(!), to describe the documentation you should keep as you carry out your R&D activities. It means: In real time. We think that a check-in or two along the way during the year makes a lot of sense — call it insurance if you like — which is why we also suggest an (optional, additional) [documentation review service](https://www.standardledger.co/rd-and-grant-services/#rd-documentation-review) if you’re doing R&D. - [STARTUP FOUNDER INFORMATION](https://support.standardledger.co/knowledge/startup-founder-information?hsLang=en#main-content) - [Startup Funding](https://support.standardledger.co/knowledge/startup-founder-information?hsLang=en#startup-funding) - [CONTACTING STANDARD LEDGER](https://support.standardledger.co/knowledge/contacting-standard-ledger?hsLang=en) - [OUR BOOKKEEPING SERVICES](https://support.standardledger.co/knowledge/our-bookkeeping-services?hsLang=en#main-content) - [Bookkeeping Services](https://support.standardledger.co/knowledge/our-bookkeeping-services?hsLang=en#bookkeeping-services) - [Dext for Supplier invoices and Employee Expenses](https://support.standardledger.co/knowledge/our-bookkeeping-services?hsLang=en#dext-for-supplier-invoices-and-employee-expenses) - [OUR PAYROLL SERVICES](https://support.standardledger.co/knowledge/our-payroll-services?hsLang=en#main-content) - [Employers](https://support.standardledger.co/knowledge/our-payroll-services?hsLang=en#employers) - [Employees](https://support.standardledger.co/knowledge/our-payroll-services?hsLang=en#employees) - [OUR TAX SERVICES](https://support.standardledger.co/knowledge/our-tax-services?hsLang=en#main-content) - [Activity Statements](https://support.standardledger.co/knowledge/our-tax-services?hsLang=en#activity-statements) - [Tax Returns](https://support.standardledger.co/knowledge/our-tax-services?hsLang=en#tax-returns) - [OUR CFO SERVICES](https://support.standardledger.co/knowledge/our-cfo-services?hsLang=en) - [OUR FINANCIAL MODELING SERVICES](https://support.standardledger.co/knowledge/our-financial-modeling-services?hsLang=en#main-content) - [Financial model usage guidelines](https://support.standardledger.co/knowledge/our-financial-modeling-services?hsLang=en#financial-model-usage-guidelines) - [OUR R&D TAX INCENTIVE SERVICES (Australia)](https://support.standardledger.co/knowledge/our-rd-tax-incentive-services-australia?hsLang=en) - [OUR GRANT SERVICES](https://support.standardledger.co/knowledge/our-grant-services?hsLang=en#main-content) - [Top Grants](https://support.standardledger.co/knowledge/our-grant-services?hsLang=en#top-grants) - [OUR VALUATION SERVICES](https://support.standardledger.co/knowledge/our-valuation-services?hsLang=en#main-content) - [How we prepare your valuations](https://support.standardledger.co/knowledge/our-valuation-services?hsLang=en#how-we-prepare-your-valuations) - [OUR ACCOUNTS PAYABLE SERVICES](https://support.standardledger.co/knowledge/our-accounts-payable-services?hsLang=en) - [ACCOUNTING](https://support.standardledger.co/knowledge/accounting?hsLang=en#main-content) - [Xero](https://support.standardledger.co/knowledge/accounting?hsLang=en#xero) - [Accounting / Bookkeeping Articles](https://support.standardledger.co/knowledge/accounting?hsLang=en#accounting-bookkeeping-articles) - [PAYROLL](https://support.standardledger.co/knowledge/payroll?hsLang=en#main-content) - [Payroll articles](https://support.standardledger.co/knowledge/payroll?hsLang=en#payroll-articles) - [TAX and COMPLIANCE](https://support.standardledger.co/knowledge/tax-and-compliance?hsLang=en#main-content) - [Structure](https://support.standardledger.co/knowledge/tax-and-compliance?hsLang=en#structure) - [Key dates and How PAYG and GST work](https://support.standardledger.co/knowledge/tax-and-compliance?hsLang=en#key-dates-and-how-payg-and-gst-work) - [ATO information](https://support.standardledger.co/knowledge/tax-and-compliance?hsLang=en#ato-information) - [Income and deductions](https://support.standardledger.co/knowledge/tax-and-compliance?hsLang=en#income-and-deductions) - [UK ARTICLES](https://support.standardledger.co/knowledge/uk-articles?hsLang=en#main-content) - [Company setup and operations](https://support.standardledger.co/knowledge/uk-articles?hsLang=en#company-setup-and-operations) - [Payroll](https://support.standardledger.co/knowledge/uk-articles?hsLang=en#payroll) - [VAT](https://support.standardledger.co/knowledge/uk-articles?hsLang=en#vat) - [Raising Capital](https://support.standardledger.co/knowledge/uk-articles?hsLang=en#raising-capital) Need support? email support@standardledger.co © 2026 Standard Ledger