U.S. businesses are now eligible to claim a 43.5% cash rebate for R&D costs incurred in Australia

The 43.5 cent ‘cash back’ benefit is now available to some companies incorporated in the United States and Canada and who undertake R&D in Australia.

Who is eligible?
U.S and Canadian entities may be eligible where they have setup:

  • an Australian resident company;
  • a corporation that is an Australian resident for taxation purposes; or
  • a permanent establishment in Australia.

Under the new R&D tax incentive, the Refundable limb of the Incentive operates as a 43.5%
Offset for companies with turnover < $20M (or a 38.5% non-refundable offset if turnover exceeds
$20M). The mechanics of the offset apply whereby a company forfeits their Income Tax deduction
for eligible R&D Costs and claims the 43.5/38.5% credit in exchange. This allows companies to bring
forward any tax losses and “cash out” the losses to the extent of eligible R&D in a claim year.
The following calculator may assist a potential R&D tax claimant to derive their draft benefit.

Do you have tax losses?

Are your carry forward tax losses greater than your R&D spend?

Is your group agregated turnover under AU$20 million?

Company Turnover

Total Company Expenses

Eligible R&D Expenses within Total Company Expenses

Opening Balance of Tax Losses

Scenario C - No Tax Losses Carried forward from previous years
Prima Facie Taxable Income (Pre R&D/Application of Tax Losses)
Add R&D Expenditure Forfeited as deduction/Claimed as Offset
Less Tax Losses Applied to Current Year Income
Revised Taxable Income
Tax Payable on Above (30%)
Credit for R&D Tax Offset
Net Tax Payable/(R&D Offset Refundable)
Closing Balance of Tax Losses

What’s it worth?
The following table provides a more specific overview:


Condition Requirement
Group Turnover All companies in group collectively have a turnover less than AU$20 Million
Tax Position Australian Company is in Tax Loss
Benefit 43.5 cents in the dollar refund

Example 1:

An Australian subsidiary company,  may be eligible for the R&D tax incentive, where:

  • the Australian company is wholly owned by its U.S parent company and qualifies as an R&D entity;
  • The U.S Company controls the Australian Resident Company;
  • The U.S Company, the Australian Company, and any other companies that the two companies are associated with, have a collective aggregated turnover of less that AU$20 million;
  • Under an agreement, the U.S Company agrees to undertake R&D activities in its Australian office solely for the benefit of the Australian Company;
  • In the agreement, the Australian Company does not own any Intellectual Property (I.P.) generated out of the U.S Company, but is legally entitled to all I.P. arising from the R&D activities;
  • The Australian Company incurs $100,000 in R&D expenditure for the 2017 Financial Year;
  • The consideration between the Australian and U.S companies is at arm’s length and will be paid even if the R&D is not successful.


Example 1: Expenditure
Australian Subsidiary Company’s R&D expenditure $100,000
Australian Subsidiary Company’s R&D Tax Incentive Benefit $43,500 Cash Refund

Requirements for setting up an Australian Company

Foreign companies will need to set up an Australian company, and expect the following:

  • Costs to setup the company to not exceed AU$1,500 (plus GST) to incorporate an eligible Australian entity in order to claim the R&D Tax incentive.
  • Company incorporation within Australia can take between 2-3 days.
  • Foreign entities will require the availability of an Australian resident director
  • The Australian Financial year runs from 1 July to the 30 June, however foreign entities can submit an application to the ATO for a substitute financial year to align with their parent company’s timeframes.

How do I claim my expenditure?

  • Eligible Australian subsidiaries will need to register their activities with AusIndustry not later than 10 months after the Australian company’s year end.
  • R&D expenditure is claimed through the lodgement of an R&D Tax Incentive claim as part of their annual income tax return.

If you have a U.S entity and are interested in claiming the R&D Tax Incentive in Australia, contact us to determine your eligibility and discuss your options.

Click here for the downloadable PDF version of this page.

Click here to view a Biotechnology Case Study. 

Click here to compare Australian R&D ‘cash out’ R&D tax incentives to other countries around the world.

Contact Details

Adam Rogers
Swanson Reed
R&D Tax Specialist
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Phone No: +1 844 467 9267
David Tomasi
Moore Stephens
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James Tng
Moore Stephens
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Swanson Reed - Specialist R&D Tax Advisors
Swanson Reed - Specialist R&D Tax Advisors
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Daniel McGregor
Daniel McGregor
I have been using Swanson Reed for my clients for more than a decade. Having a specialist firm that can provide practical and commercial advice that produces real outcomes is very important and we have received great feedback from our clients. Highly recommended.
Damian and the rest of the team at Swanson Reed have been supporting us for several years. We always appreciate their insights, expertise, and efforts.
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Anatole Kononewsky
The Swanson Reed team have provided our company with exceptional professional advice and assistance for all of our R&D claims for many years - have always achieved great results with excellent value for their services.
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Payam Toloo
Damian Smyth and his team are very helpful, supportive and experts in their field of R&D Tax claims. I'm always happy with the work they do and been a customer of their for over 5 years.
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Melissa Doddy
The Team at Swanson Reed are very experienced R&D Tax Advisors and gave us ongoing support with all of our R&D Claims, the consultants ensured we were always working with current legislative guidelines, gave us assistance with compiling technical and government documentation and went out their way to ensure they were with us for the entire process from beginning to end. Highly recommended to anyone who needs assistance with working through what can at times be a daunting process.
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Gary Watson
We can highly recommend Swanson and Reed as an R & D accountant. We have worked with them for several years now as they make our R & D claim so easy and communicate quickly with both us and our accountant.
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