Research & Development Tax Incentive (RDTI): Navigating Australia's Evolving Compliance Landscape

The RDTI provides either a refundable or non-refundable tax offset depending on a company's aggregated turnover and level of eligible R&D expenditure.

Eligible companies with an aggregated turnover below AU$20 million may access a refundable tax offset equal to their applicable corporate tax rate plus an 18.5 percentage point premium. For a company taxed at 25%, this equates to an effective refundable offset of 43.5%.

Companies with an aggregated turnover of AU$20 million or more are entitled to a non-refundable R&D tax offset based on an R&D intensity approach.

The R&D intensity calculation compares eligible R&D expenditure against a company's total annual expenditure. Businesses investing a higher proportion of their expenditure in qualifying R&D activities may receive a higher tax offset.

The most significant development over the past year has not been a change to the incentive itself, but the continued increase in compliance activity.

The ATO and AusIndustry are placing greater emphasis on ensuring that businesses can clearly demonstrate their eligibility for the RDTI and substantiate every aspect of their claims.

Particular attention continues to be given to:

• Software development projects 
• Artificial intelligence (AI) initiatives 
• FinTech businesses 
• Engineering and manufacturing activities 
• Commercial development projects 
• Activities that may represent business-as-usual operations rather than genuine experimental R&D 

For many organisations, successfully claiming the RDTI now depends as much on robust governance and documentation as it does on undertaking eligible R&D activities.

Regulators continue to place significant weight on contemporaneous documentation when assessing R&D claims.

Businesses should maintain clear records throughout the project lifecycle, including:

• Technical hypotheses and project objectives 
• Experiment plans and testing methodologies 
• Results and design iterations 
• Engineering and technical reports 
• Software development documentation 
• Project governance records 
• Time allocation evidence 
• Cost allocation methodologies 

Maintaining accurate, contemporaneous documentation places organisations in a stronger position should their claims be reviewed by the ATO or AusIndustry.

Claims relating to software development and artificial intelligence (AI) projects continue to attract heightened regulatory scrutiny.

Businesses should ensure they can clearly distinguish genuine experimental activities involving technical uncertainty from routine coding, implementation, deployment or configuration work.

Well-documented project governance, technical evidence and records of experimentation remain critical in supporting these claims.

Businesses undertaking overseas R&D should continue to assess Overseas Finding requirements and maintain sufficient documentation supporting international activities.

This is particularly important where projects involve overseas technical resources or are delivered across multiple jurisdictions.

Eligible entities must generally register their R&D activities with AusIndustry within 10 months after the end of their income year.

For most businesses with a 30 June year-end, this means registration is due by 30 April of the following year.

The 2026–27 Federal Budget announced several proposed reforms intended to reshape Australia's R&D Tax Incentive from 1 July 2028, subject to the passage of legislation.

Proposed measures include:

*These reforms have been announced by the Australian Government but have not yet been enacted into law.

The RDTI continues to provide significant support for businesses investing in innovation. However, successfully accessing the incentive increasingly depends on strong governance, comprehensive documentation and the ability to clearly demonstrate that activities satisfy the legislative requirements.

While the proposed reforms may reshape the regime over the coming years, organisations should continue preparing and lodging claims under the current framework while monitoring legislative developments.

Businesses undertaking software development, AI, engineering or other technically complex projects should pay particular attention to documentation quality and claim substantiation, as these remain key compliance priorities.

Businesses should consider taking the following steps to strengthen their RDTI readiness:

• Review current R&D projects to confirm they satisfy eligibility requirements. 
• Ensure documentation clearly demonstrates technical uncertainty, experimentation and project outcomes. 
• Strengthen project governance, time recording and cost allocation processes throughout the project lifecycle. 
• Review software development and AI projects to distinguish eligible experimental activities from routine operational work. 
• Confirm Overseas Finding requirements where international R&D activities are undertaken. 
• Monitor proposed legislative reforms and assess how future changes may affect long-term innovation planning. 

Taking a proactive approach today can help reduce compliance risk while improving the quality and defensibility of future R&D claims.

Successfully accessing the R&D Tax Incentive requires more than identifying eligible expenditure. Organisations need clear governance, robust technical documentation and evidence that demonstrates how eligible activities satisfy the legislative requirements.

Vistra supports businesses throughout the RDTI lifecycle, including eligibility assessments, technical reviews, claim preparation, cost substantiation, software and AI project reviews, AusIndustry registrations, and assistance with ATO and AusIndustry reviews or audits.

By combining technical tax expertise with practical compliance support, we help organisations maximise the value of the R&D Tax Incentive while strengthening the quality and defensibility of their claims.

Whether you're assessing project eligibility, preparing supporting documentation or responding to an ATO or AusIndustry review, Vistra's specialists can help you navigate every stage of the R&D Tax Incentive process with confidence.

Get in touch with our team to discuss how we can support your R&D Tax Incentive requirements.