The Research and development (R&D) tax incentive replaced the R&D tax concession from 1 July 2011. It provides targeted R&D tax offsets designed to encourage more companies to engage in R&D. The incentive has two core components. Entities engaged in R&D may be eligible for: a 45% refundable tax offset (equivalent to a 150% deduction) for eligible entities with an aggregated turnover of less than $20 million per annum, provided they are not controlled by income tax exempt entities a 40% non-refundable tax offset (equivalent to 133% deduction) for all other eligible entities (entities may be able to carry forward unused offset amounts to future income years). The R&D tax incentive has several objectives. It aims to:

• boost competitiveness and improve productivity across the Australian economy
• encourage industry to conduct R&D that may not otherwise have been conducted
• provide business with more predictable, less complex support
• improve the incentive for smaller firms to engage in R&D.

The ATO and AusIndustry (on behalf of Innovation Australia) administer the R&D tax incentive jointly. The ATO determines if the expenditure you are claiming in your tax return for your R&D activities is eligible. AusIndustry manages the registration of your R&D activities and checks that they comply with the law.