R&DTI & Compliance: What May 2025 Means for Claimants
Executive Summary.
The 2025–26 Budget made no legislative changes to the R&D Tax Incentive, but a DISR-led strategic review is already tightening administration. Heightened ATO–DISR collaboration is increasing scrutiny—particularly for software and process-improvement claims—and places a premium on clear hypotheses, measurable outcomes, and strong expenditure nexus.
The Body by Michael ART case underscores the need for structured scientific documentation from project inception. Meanwhile, new and reopened programs across clean energy, manufacturing, export readiness, and leadership capability create targeted grant pathways. With a competitive audit and funding environment, businesses should strengthen R&D governance and pre-position for priority grants now.
Regulatory Landscape & Economic Development
No legislative change, but strategic review signals tightening
DISR’s review is focusing on consistency, practical rulings, and agency coordination. The RDTAA has called for safe-harbour rulings, accreditation/CPE for advisers and regulators, and clearer joint ATO–DISR guidance.
Audit environment
- Core Activity registrations (CITR) target ~28 days but vary by complexity; Overseas Findings often exceed eight months.
- High-risk signals include identical project/core titles and missing experimental hypotheses.
- Use the word “experiment” in core narratives and quantify technical uncertainty (beyond market novelty).
Case precedent: Body by Michael (ART)
- “Hypothesis” cited 99 times — documented scientific method was decisive.
- Contemporaneous records aren’t legislated but are practically essential.
- Legal representation and expert preparation are recommended for reviews/appeals.
Key compliance focus areas
- Sufficient nexus: Costs must directly relate to registered core/supporting activities, with exclusive use or robust apportionment evidence.
- Intercompany transactions: Must be paid (not merely invoiced) and reflect arm’s-length terms.
- Findings: Use Advanced/Overseas Findings selectively—where eligibility is genuinely uncertain or investor confidence depends on it.
Risk mitigation: R&D audit insurance (indicative A$2,500–A$4,000) is increasingly used to hedge dispute costs.
Government Grants Spotlight
New and re-opened programs align with national/state priorities — regional innovation, sustainability, digital uplift, and gender equity.
10 high-interest grants to watch
- Accelerating Commercialisation (Industry Growth Program)
- Business Research & Innovation Initiative (BRII)
- Export Market Development Grant (EMDG)
- Strengthening Business — NT / disaster recovery streams
- Regional Tech Hub & Tourism Modernisation grants
Also in focus
- Women in Leadership: A$5,000 scholarships for executive education.
- Clean energy & sustainability: ARENA/CEFC, NSW Clean Tech Commercialisation, QLD RRIDP; MMI expected to reopen aligned to NRF.
- Export initiatives: Opportunities in Vietnam (digital learning, agrifood) and Poland (sustainable mining tech).
- Community & NFP: Stronger Communities, Volunteer Grants, and state programs; philanthropic co-funding emerging.
Innovation & Funding Programs
- NSW Innovation Blueprint 2035: Precinct-driven growth in advanced manufacturing, medtech, and renewables; faster trials/testbeds.
- Queensland: Ignite Ideas expansion, Industry Research Fellowships, and regional commercial-ready support (AI, space, green energy).
- Western Australia: StartupWA roundtables; CORE Innovation Hub commercialisation programs in resources/clean energy.
- Exporter pathways: 2025 Exporter of the Year nominations help signal eligibility for EMDG & Asia Trade programs.
- Fintech & AI: Open banking/payments reform and data portability; interest in privacy-enhancing tech and responsible AI.
Federal Budget 2025–26: Key Points
- R&DTI: No legislative amendments; exclusions for gambling/tobacco apply from 1 July 2025 income years.
- ATO funding: ~A$999m over five years targets avoidance, shadow economy, and integrity — expect scrutiny of intercompany flows and cross-border claims.
- Business measures: Instant Asset Write-Off to 30 June 2025 (A$30k cap); deferred foreign-resident CGT changes.
- Investment: ~A$120b/10yrs transport; green industry push via CEFC plus green iron/steel; NRF allocations for advanced manufacturing.
What this means for R&D-active businesses
- Compliance is key: Clear hypotheses, systematic experiments, and tight apportionment.
- Mind the commercialisation gap: Use collaborative grants, university links, and VC co-investment.
- Align to national priorities: Defence, climate, digital capability, and health.
- Consider audit insurance: Manage growing audit exposure.
Upcoming Events & Webinars (May–June 2025)
- SmallBiz Week 2025 — Melbourne + Online, 20–23 May: Growth, compliance, AI tools.
- ATO EOFY Stocktake Webinars — May–June: Tax readiness & substantiation.
- CORE Commercialisation Clinics (WA) — Ongoing: Grant leverage & investor strategy.
- WA Innovator of the Year Briefing — June: Award application strategy.
- Ignite Ideas Grant Bootcamps (Brisbane) — May–June: Grant readiness.
- Export Navigator (Brisbane + Regional) — June: Global scaling & pitch strategy.
Gary Neugebauer
