R&D Tax Incentive Eligibility: Entity and Activity Requirements

What Does Self-Assessment Mean?

Like the rest of the tax system, the R&D Tax Incentive (R&DTI) is based on self-assessment. This means you take responsibility for confirming that both you and your R&D activities meet the program's eligibility requirements before you apply.

The complete eligibility definitions for the R&DTI are set out in section 355 of the Income Tax Assessment Act 1997 (ITAA).

Eligible Entities

Start by checking whether you qualify as an eligible R&D entity—this comes before you assess your activities.

You are an eligible R&D entity if you are a corporation that falls into one of these categories:

• Incorporated under an Australian law
• Incorporated under a foreign law but an Australian resident for income tax purposes
• Incorporated under a foreign law and you meet both conditions:
  • You are a resident of a country with which Australia has a double tax agreement that includes a 'permanent establishment' definition
  • You carry on business in Australia through a permanent establishment as defined in that agreement

The Australian Taxation Office (ATO) makes final decisions on entity eligibility for the R&DTI. You can find more information—including details about consolidated and multiple entry consolidated groups—on the ATO's Eligibility for R&D tax offsets page.

Eligible Activities

Your R&D activities qualify if they are core R&D activities or directly support core R&D activities (known as supporting R&D activities).

Not all R&D activities are eligible under the R&DTI program. From 1 July 2025 onwards, R&D relating to tobacco and gambling is excluded, unless the sole purpose is harm minimisation.

You may claim the R&D tax offset for overseas activities, provided you have obtained a positive overseas finding beforehand.

The Department of Industry, Science and Resources makes determinations about activity eligibility for the R&DTI.

Core R&D Activities

Core R&D activities are experimental activities designed to create new knowledge—such as new or improved materials, products, processes, or services. For an activity to qualify, the outcome must:

• Not be capable of being known or determined in advance, and
• Only be determinable through systematic work (hypothesis, experiment, observation, evaluation, and logical conclusions)

Tobacco and gambling-related activities can only qualify as core R&D if conducted solely for harm minimisation purposes.

Supporting R&D Activities

Supporting R&D activities are those that directly support a core R&D activity.

Some activities must meet an extra condition before they count as supporting activities. If your activity (except those related to gambling or tobacco):

• Cannot be classified as a core R&D activity, or
• Produces or directly relates to producing goods or services

Then it must be conducted primarily for the purpose of supporting a core R&D activity.

Tobacco and gambling activities can only qualify as supporting R&D if conducted solely for harm minimisation.

Excluded R&D Activities

The R&DTI program excludes certain activities from registration.

However, some excluded core R&D activities may still qualify as supporting activities if they:

• Directly support an eligible core R&D activity, and
• Are conducted primarily to support that core R&D activity

Gambling and tobacco activities only qualify if conducted solely for harm minimisation.

Eligible Entities – Quick Reference

Use this table to check whether your entity qualifies for the R&D Tax Incentive:

Note: The Australian Taxation Office (ATO) makes final decisions on entity eligibility. For consolidated groups or other complex structures, refer to the ATO's Eligibility for R&D tax offsets page.

R&D Activity Types – Quick Reference

Use this table to determine whether your activities qualify under the R&D Tax Incentive:

Note: From 1 July 2025 onwards, tobacco and gambling activities are excluded unless conducted solely for harm minimisation. The Department of Industry, Science and Resources makes determinations about activity eligibility.