Eligibility - 5 min read
R&D Tax Incentive 2026: rates, thresholds and refunds explained simply
A plain-English guide to how the R&D Tax Incentive pays out in 2026: the refundable and non-refundable offsets, the turnover threshold that decides which one you get, the $20k minimum, and a worked example for a software company.
If you have decided your software company probably does eligible R&D, the next question is the obvious one: what is it actually worth? The R&D Tax Incentive (R&DTI) is generous, but the way it pays out depends on a couple of thresholds that are easy to get lost in. This is the plain-English version.
This is general information to help you understand the program, not tax advice. Your registered tax adviser works out and lodges your actual claim. All figures here are on an FY2026 basis.
The one number that decides everything: your turnover
The incentive comes in two flavours, and which one you get is decided by your company's aggregated turnover.
- Under A$20M turnover: you get the refundable offset.
- A$20M turnover and over: you get the non-refundable offset.
Refundable is the one startups care about, so start there.
The refundable offset (turnover under A$20M)
If your aggregated turnover is under A$20M, your offset is refundable, and it is worth your company tax rate plus 18.5 percentage points.
For most companies at this size the company tax rate is the 25% base rate, so the offset works out to about 43.5% of your eligible R&D spend.
The word that matters is refundable. It means that if the offset is more than the tax you owe, the difference is paid to you as cash. For a startup running at a loss, which is most of them, that is real money in the bank rather than a credit you cannot use yet. This is why founders treat the R&DTI as runway, not just a tax saving.
A worked example
Say your engineers spent the year building genuinely novel features, and once you strip out the routine work, A$300,000 of that spend is eligible R&D.
- Eligible R&D spend: A$300,000
- Refundable offset at 43.5%: about A$130,500
If your company made a loss that year, that A$130,500 comes back to you as cash.
The non-refundable offset (turnover A$20M and over)
If your turnover is A$20M or more, your offset is non-refundable. It reduces the tax you owe rather than being paid out as cash, and anything you cannot use this year can be carried forward to future years.
The rate is your company tax rate plus an R&D intensity premium:
- A premium of 8.5 percentage points on the portion of your R&D up to 2% intensity (your eligible R&D spend as a share of total expenditure).
- A premium of 16.5 percentage points on the portion above 2% intensity.
In other words, the more R&D-intensive your business, the higher the rate on the top slice. The mechanics here genuinely need an adviser; the headline is that larger companies still get a meaningful benefit, just as a reduction in tax rather than a cash refund.
The thresholds that gate a claim
Two more numbers decide whether you can claim at all.
- A$20,000 minimum eligible R&D spend. Below this, you generally cannot claim (with limited exceptions for spend through a Research Service Provider). For most software teams, clearing A$20k is not the hard part.
- A$150M cap on eligible R&D expenditure. Spend above this in an income year still gets you the standard deduction, but not the offset. Almost no software company will get near this, but it exists.
A reality check on the headline rate
It is tempting to read "43.5%" as free money, so here is the honest framing.
The 43.5% is the offset rate, and it replaces the normal tax deduction you would have got on that spend anyway. For a profitable company, your net benefit versus the ordinary deduction is the premium portion, not the full 43.5%. For a pre-profit startup, though, the refundable offset is cash you would genuinely not have received otherwise, which is why it lands so differently depending on where your company is.
Either way, it is a substantial benefit. It is just worth understanding what kind of benefit it is before you bank on a number.
What actually drives your number
Two things move your claim more than the rate does:
- How much of your spend is genuinely eligible. The rate is fixed; the eligible base is where the real variability is. Honestly separating your experiments from your routine build is the whole game, and getting it wrong in either direction either leaves money on the table or creates an indefensible claim.
- How well it is substantiated. A number you cannot defend is a liability, not an asset. Eligible spend you can tie to real evidence, the pull requests behind each experiment, is what survives an ATO review.
The short version
- Under A$20M turnover: a refundable offset of about 43.5% of eligible R&D spend, paid as cash if you are in a loss.
- A$20M and over: a non-refundable offset at your tax rate plus an intensity-based premium, reducing tax payable.
- A$20,000 minimum eligible spend; A$150M cap.
- The rate is the easy part. Your eligible base and your substantiation are what decide the real number.
If you want a rough sense of your own figure, our estimate tool will give you one in a couple of minutes, and when you are ready we build the substantiated version from your actual GitHub history for your adviser to review and lodge.
This article is general information, not tax advice, and not a determination of eligibility. Figures are rough FY2026 estimates. Speak to a registered tax adviser before lodging an R&D Tax Incentive claim.