R&D Tax Incentive 2025: Everything You Need to Know Before the Deadline

The R&D Tax Incentive (RDTI) is a game-changer for Australian businesses investing in innovative projects.

In recent years, the RDTI has been evolving — we have witnessed more compliance checks, new transparency rules and a shift in industries claiming the incentive. If your business is claiming (or plans to), now’s the time to prepare.

The deadline for the majority of Australian companies is 30 April 2025, meaning this deadline fast approaching (companies with a 30 June 2024 year-end).

Let’s break down what’s changing, how it affects you and what you should do next.

What is the R&D Tax Incentive and Who is Eligible?

The R&D Tax Incentive is a federal government program encouraging businesses to invest in research and development activities by offering a tax offset on eligible costs.

To qualify, your business must:

• Be an Australian-registered company.
• Undertake eligible R&D activities in Australia, which include:
  • Core R&D activities –experimental activities that aim to generate new knowledge (new products/processes) with uncertain outcomes.
  • Supporting R&D activities – operations that directly support the core R&D work.
• Spend at least $20,000 on eligible R&D activities within the financial year.

The R&D Tax Incentive provides tax offsets based on company size and R&D intensity:

• Refundable tax offset: Small businesses (aggregated turnover under $20M) can receive an offset of 18.5% (or more) above their company tax rate.
• Non-refundable tax offset: For larger businesses (turnover $20M+), a tiered system applies:
  • 0–2% R&D intensity = 8.5% premium above the corporate tax rate.
  • Above 2% R&D intensity = 16.5% premium above the corporate tax rate.

This new structure, introduced on 1 July 2021, replaces the previous flat rates of R&D.

R&D Tax Incentive: 30 April 2025 Deadline

If your business has a 30 June financial year-end, the final date to lodge your FY24 R&D claim is 30 April 2025. Miss this deadline and you miss out—late applications aren’t accepted.

What to do now:

• Confirm eligibility – Are your R&D activities compliant? If unsure, now is the time to check.
• Get your records in order – The ATO is tightening compliance so detailed documentation is key.
• Seek expert advice – A poorly prepared claim can trigger audits or rejection. Having the right guidance matters.

R&D Transparency Report

The ATO’s new R&D Transparency Report (released October 2024) shows who is claiming the incentive and how much they’re spending. Key takeaways from FY21–22 data:

• $11.2 billion in R&D spend, with $3 billion in tax offsets—a 12% increase from the prior year.
• Tech-driven industries (software, AI, climate tech) made up 45% of claims, outpacing traditional sectors.
• Small businesses and start-ups were the biggest users —51% of claimants were less than 10 years old.
• Large enterprises made up only 14% of claimants but accounted for 44% of total R&D spend.

With greater transparency and compliance scrutiny, businesses must ensure claims are accurate and well-documented.

What’s Changing in 2025?

The R&D Tax Incentive isn’t just growing—it’s shifting. Here’s what to expect:

1. More R&D Investment in Emerging Industries

AI, biotech, fintech, and climate tech are driving more R&D claims. With venture capital bouncing back, these industries are set to lead in FY24–25 and beyond.

2. Stricter Compliance and More Audits

The ATO is ramping up enforcement, focusing on:

• Audit readiness – Businesses need real-time documentation (timesheets, code repositories, experiment logs).
• Payments to associates – “Round-robin” payments are under scrutiny.
• AI-driven compliance monitoring – More claims will be reviewed using advanced data analytics.

3. Expansion Across More Sectors

Software and AI are leading the charge, but manufacturing, fintech, and clean energy are catching up. Australia is positioning itself as an R&D powerhouse.

4. Industry Scrutiny & Policy Debate

Some sectors—like gaming and software—are facing increased scrutiny over whether their R&D qualifies. Expect ongoing debate and potential policy shifts in 2025.

What You Should Do Next

With the 30 April 2025 deadline fast approaching, now is the time to ensure your R&D claim is accurate and compliant. 

If your business is already conducting R&D, it’s essential to have the right records in place and structure your claim correctly. For those planning future R&D, setting up strong documentation processes now will help avoid compliance issues later.

If you’re unsure about eligibility or want to maximise your return, Carbon’s R&D specialists can guide you through the process. Reach out to us today and let’s make sure you get the full benefit of your R&D investment.