R&D Tax Incentive Services
Australia’s R&D Tax Incentive offers tax offsets of up to 48.5% on eligible research and development expenditure – one of the most generous programs in the OECD. Australian businesses spent $24.4 billion on R&D in 2023-24 (up 18% from 2021-22), with AI research growing 142% to $668 million. For foreign companies looking to conduct R&D in Australia, accessing this incentive starts with the right corporate structure. AusBusinessRegister.com.au helps foreign-owned companies set up and maintain the Australian entity needed to claim the R&D Tax Incentive, from Pty Ltd incorporation and resident director appointment through to ongoing ASIC compliance.
Why Foreign Companies Choose Australia for R&D
Australia combines strong tax incentives with world-class research infrastructure, making it an increasingly attractive destination for foreign companies to locate R&D operations.
- Up to 48.5% refundable tax offset on eligible R&D spending for companies with aggregated turnover under $20 million (43.5% at the 25% base tax rate, 48.5% at the 30% standard rate)
- Non-refundable offsets of 38.5% to 46.5% for larger entities, with intensity-based tiers rewarding higher R&D investment
- Cash refunds available – the offset is paid even if the company has no tax liability, meaning you get up to 48.5 cents back for every dollar spent on eligible R&D
- $24.4 billion R&D ecosystem – Australia’s business R&D expenditure grew 18% in 2023-24, with software engineering ($4.9B) and AI ($668M, up 142%) leading growth
- Double Tax Agreements with 45+ countries, allowing efficient repatriation of profits and R&D benefits
- Top-ranked universities and a skilled English-speaking workforce across technology, biotech, manufacturing, and agriculture sectors
- Stable legal framework with strong IP protections, transparent regulation, and a common law system familiar to US and UK companies
How the R&D Tax Incentive Works for Foreign-Owned Companies
The R&D Tax Incentive is jointly administered by AusIndustry (Department of Industry, Science and Resources) and the Australian Taxation Office (ATO). Foreign companies access the program by establishing an eligible Australian entity that conducts R&D activities in Australia.
Eligibility Paths for Foreign Companies
| Structure | Eligibility | Best For |
|---|---|---|
| Australian Pty Ltd subsidiary | Automatically eligible – incorporated with ASIC | Most foreign companies. Clean structure, limited liability, full access to incentives |
| Foreign corporation (AU tax resident) | Eligible if central management and control is in Australia | Companies relocating headquarters or key decision-making to Australia |
| Foreign corporation with PE | Eligible if from a DTA partner country with a permanent establishment in Australia | Companies with existing Australian operations but no local entity |
Our recommendation: For most foreign companies, incorporating an Australian Pty Ltd subsidiary is the simplest and most effective path. The subsidiary is automatically eligible for the R&D Tax Incentive, provides limited liability separation from the parent company, and creates a clean structure for Australian operations.
Current R&D Tax Offset Rates (2025-26)
| Company Size | Offset Type | Rate | Cash Refund? |
|---|---|---|---|
| Under $20M turnover (base rate entity, 25% tax) | Refundable | 43.5% (25% + 18.5% premium) | Yes – up to $4M/year |
| Under $20M turnover (standard rate, 30% tax) | Refundable | 48.5% (30% + 18.5% premium) | Yes – up to $4M/year |
| $20M+ turnover, R&D intensity 0-2% | Non-refundable | 38.5% (30% + 8.5%) | No – reduces tax liability only |
| $20M+ turnover, R&D intensity above 2% | Non-refundable | 46.5% (30% + 16.5%) | No – reduces tax liability only |
Important for multinationals: Aggregated turnover includes the worldwide group – your parent company’s global revenue counts. If total group turnover exceeds $20 million, only the non-refundable offset is available (no cash refund). This is a common surprise for subsidiaries of larger companies.
What We Handle: Setting Up Your R&D Entity
AusBusinessRegister.com.au provides the corporate infrastructure foreign companies need before they can claim the R&D Tax Incentive. We handle everything except the R&D tax claim itself, which requires a specialist R&D tax adviser.
1. Australian Subsidiary Incorporation
We register your Pty Ltd company with ASIC, establishing the eligible entity that will conduct R&D in Australia. This includes selecting the appropriate company structure, preparing the constitution, appointing directors, and obtaining your ACN (Australian Company Number). Learn more about company formation.
2. Resident Director Appointment
Australian law requires at least one director who ordinarily resides in Australia. Our resident director service satisfies this requirement, providing a qualified professional who understands ASIC obligations and corporate governance requirements for R&D entities.
3. ABN, TFN and GST Registration
Your subsidiary needs an Australian Business Number (ABN), Tax File Number (TFN), and likely GST registration before it can lodge a tax return and claim the R&D offset. We handle all tax registrations as part of the setup process. See ABN and GST registration services.
4. Registered Office Address
Every Australian company must maintain a registered office address that is open during business hours. We provide ASIC-compliant registered office addresses in Sydney, Melbourne, Brisbane, and Perth.
5. Ongoing ASIC Compliance
Once your R&D subsidiary is operational, it has annual compliance obligations – ASIC annual reviews, director updates, financial reporting, and ongoing corporate secretarial requirements. Our ongoing compliance packages ensure nothing falls through the cracks while your team focuses on R&D.
6. R&D Tax Adviser Referral
The R&D Tax Incentive claim itself requires specialist expertise – registering activities with AusIndustry, preparing the R&D Tax Incentive Schedule (NAT 73794), and documenting eligible expenditure. We connect you with experienced R&D tax advisers who specialise in claims for foreign-owned entities. Our taxation services team coordinates the handoff.
The End-to-End Process: From Decision to First R&D Claim
| Phase | What Happens | Who Does It | Timeline |
|---|---|---|---|
| 1. Structure & Setup | Incorporate Pty Ltd, appoint directors, register ABN/TFN/GST | AusBusinessRegister.com.au | 2-4 weeks |
| 2. Bank Account | Open Australian business bank account for the subsidiary | AusBusinessRegister.com.au + bank | 2-6 weeks |
| 3. Operations Begin | Hire staff, lease premises, begin R&D activities | Your company | Ongoing |
| 4. R&D Registration | Register eligible R&D activities with AusIndustry | R&D tax adviser | Within 10 months of FY end |
| 5. Tax Return + Claim | Lodge company tax return with R&D schedule | R&D tax adviser / tax agent | After FY end |
| 6. Ongoing Compliance | ASIC annual review, BAS lodgement, financial statements | AusBusinessRegister.com.au | Annually |
Industries We Support
Foreign companies in these sectors commonly establish Australian R&D subsidiaries:
Technology & Software
Australia’s tech sector benefits from a highly skilled workforce and proximity to Asia-Pacific markets. Software engineering is the largest R&D sub-field at $4.9 billion (up 26% since 2021-22), while AI R&D grew 142% to $668 million in 2023-24. Software R&D claims are scrutinised closely by the ATO – activities must involve genuine technical uncertainty, not routine development using established frameworks. Our R&D tax adviser partners specialise in documenting software R&D to withstand ATO review.
Biotechnology & Pharmaceuticals
Clinical trial expenditure is exempt from the $4 million refundable offset cap, making Australia particularly attractive for biotech R&D. The country’s strong regulatory framework (TGA) and research hospital network support drug development and medical device innovation.
Manufacturing & Advanced Materials
Companies developing new manufacturing processes, materials, or production methods can claim R&D offsets on eligible experimental activities. Australia’s mining and resources expertise creates unique opportunities in materials science and process engineering.
Agriculture & Food Technology
Australia’s diverse climate zones and world-leading agricultural research institutions make it ideal for agritech R&D. Activities in crop science, food processing innovation, and sustainable farming technologies can qualify for the incentive.
Clean Energy & Environment
Renewable energy, carbon capture, battery technology, and environmental remediation R&D benefit from both the R&D Tax Incentive and Australia’s growing commitment to clean energy transition.
Key Considerations for Foreign Companies
Aggregated Turnover Trap
Your Australian subsidiary’s eligibility for the refundable (cash) offset depends on the worldwide group’s total turnover, not just the subsidiary’s revenue. A subsidiary of a global company turning over $50 million will only access the non-refundable offset – still valuable, but no cash refund. Plan your structure accordingly.
Transfer Pricing
If the parent company funds the Australian subsidiary’s R&D, transfer pricing rules apply. The ATO expects arm’s-length pricing for intercompany transactions, and R&D conducted primarily for the benefit of an associated foreign entity faces additional scrutiny under Section 355-210 of the Income Tax Assessment Act 1997.
Overseas R&D Activities
R&D must generally be conducted in Australia to qualify. Overseas activities require an Overseas Finding from AusIndustry, which must be applied for before the financial year ends – there are no extensions. Cost savings alone are not a valid reason for conducting R&D offshore.
One-Strike Policy (From July 2025)
AusIndustry introduced a one-strike assessment policy from 1 July 2025. If a single eligibility requirement fails during review, the entire claim may be rejected without further assessment. This makes professional R&D tax advice and thorough documentation more important than ever – particularly for foreign companies unfamiliar with AusIndustry’s expectations. The registration form has also been expanded with additional questions requiring more detail.
Record-Keeping from Day One
The ATO expects contemporaneous records – documentation created at or near the time activities are conducted. Start your record-keeping systems before R&D activities begin, not after. This includes timesheets linking staff to registered activities, experiment logs, and expenditure apportionment methodologies.
Key Deadlines
| Deadline | Detail |
|---|---|
| AusIndustry registration | Within 10 months after the end of the income year (e.g., 30 April 2026 for FY ending 30 June 2025) |
| Overseas Finding application | Before the end of the income year – no late applications accepted |
| Minimum R&D spend | $20,000 total R&D deductions (unless via Registered Research Service Provider) |
| Refundable offset cap | $4 million per year (clinical trials exempt) |
| Expenditure threshold | R&D spending above $150M per year receives no premium |
Our Pricing for R&D Entity Setup
Setting up an Australian subsidiary for R&D operations typically involves:
| Service | Price |
|---|---|
| Company registration (Pty Ltd) | From $900 + GST |
| Resident director services | From $6,000/yr + GST |
| ABN, TFN & GST registration | Included with company formation |
| Registered office address | From $495/yr + GST |
| Ongoing ASIC compliance | From $2,500/yr + GST |
| Banking support | From $500 + GST |
R&D tax advisory fees (activity registration, claim preparation, ATO liaison) are quoted separately by our specialist R&D tax partners based on the scope and complexity of your R&D program.
View full pricing | Request a quote
Frequently Asked Questions
Can a foreign-owned Australian subsidiary claim the R&D Tax Incentive?
Yes. An Australian-incorporated Pty Ltd is automatically eligible regardless of foreign ownership. The R&D activities must be conducted in Australia (or covered by an Overseas Finding), and the company must meet all other program requirements including minimum $20,000 in R&D expenditure.
Do I need to set up an Australian company to access the R&D offset?
In most cases, yes. The simplest and most common path for foreign companies is to incorporate an Australian Pty Ltd subsidiary. Foreign corporations can also claim if they are Australian tax residents or have a permanent establishment in Australia under a relevant Double Tax Agreement.
What is the effective R&D tax offset rate?
For small companies (under $20M aggregated turnover), the effective offset is 43.5% at the 25% base tax rate or 48.5% at the 30% standard rate. For larger companies ($20M+ turnover), it ranges from 38.5% to 46.5% depending on R&D intensity. Eligible smaller entities receive cash refunds – up to $4 million per year – even if the company has no tax liability.
Does my parent company’s global turnover affect the offset?
Yes. Aggregated turnover includes all connected and affiliated entities worldwide. If your global group turns over more than $20 million, the Australian subsidiary qualifies only for the non-refundable offset (no cash refund). The non-refundable offset still reduces your Australian tax liability.
How long does it take to set up an R&D subsidiary in Australia?
Company incorporation and tax registrations typically take 2-4 weeks. Opening a business bank account adds another 2-6 weeks. Most foreign companies are fully operational within 6-8 weeks of engagement.
Can R&D done overseas by the parent company be claimed?
Only with a positive Overseas Finding from AusIndustry, which must be applied for before the end of the income year. The overseas activity must have a scientific link to Australian core R&D, and it must be demonstrated that the work cannot be conducted in Australia. Cost savings alone are not a valid reason.
What industries are eligible for R&D tax offsets?
Any industry can claim, provided the activities meet the program’s definition of eligible R&D (experimental activities with uncertain outcomes, conducted systematically). Common sectors include technology, biotech, manufacturing, agriculture, and clean energy. From 1 July 2025, activities related to gambling and tobacco are excluded.
What does AusBusinessRegister.com.au handle vs the R&D tax adviser?
We handle the corporate infrastructure: company formation, resident directors, tax registrations, registered office, and ongoing ASIC compliance. The R&D tax adviser handles activity registration with AusIndustry, expenditure documentation, the R&D Tax Incentive Schedule, and the actual claim in the company tax return. We work together to ensure a seamless setup.
This page provides general information about the R&D Tax Incentive and is not tax advice. The R&D Tax Incentive is a self-assessment program with complex eligibility rules. Engage a qualified R&D tax adviser before making claims. AusBusinessRegister.com.au assists with company setup and compliance, not R&D tax claims directly.
Ready to set up your Australian R&D subsidiary? Request a quote or call us on +61 2 8599 9890.