Quick answer: What the R&D Tax Incentive pays depends on turnover. Under $20m, you get a refundable offset at the company tax rate + 18.5 percentage points (43.5% for a 25% base-rate entity) of eligible R&D (paid as cash if you're in losses) — so $200,000 of R&D returns roughly $87,000. At $20m+, the offset is non-refundable and adds an 8.5% / 16.5% intensity premium to your company tax rate, reducing tax payable with any excess carried forward.
25 June 2026 — the 2026–27 Federal Budget announced R&DTI changes scheduled to start 1 July 2028; this article describes the current rules unless stated otherwise.
"How much will I actually get back?" is the first question almost every company asks about the R&D Tax Incentive (R&DTI) — and it is the one most websites answer the least clearly. The rates are public, but the arithmetic is usually left vague. This article is the worked-numbers companion to our narrative explainer "How Much Support Can You Receive from the R&DTI?" — for the mechanics explained in plain English, start there; here we work through three concrete, round-number examples so you can see roughly what the benefit looks like for a pre-revenue startup, a profitable SME, and a larger company.
A note before the numbers: Ignition Research is a Registered Research Service Provider (RSP000047). Our role is to help you establish and document eligible R&D activities and contracted research — not to act as your tax agent. The figures below are illustrative, the mechanics belong to the Australian Taxation Office (ATO) and business.gov.au, and your actual benefit depends on your company's tax position. You should self-assess against the legislation and seek your own tax advice.
The two offsets, in one minute
The R&DTI delivers its benefit as a tax offset calculated on your eligible (notional) R&D expenditure. Which offset you get depends on your aggregated turnover (ATO, Rates of R&D tax incentive offset):
- Refundable offset — for companies with aggregated turnover under $20 million. The rate is your company tax rate + 18.5 percentage points. For a base-rate entity taxed at 25%, that is 43.5%. Crucially, this offset is refundable: if it exceeds the tax you owe — which is common for a company in tax losses — the balance is paid to you as a cash refund (business.gov.au, Overview of the R&DTI).
- Non-refundable offset — for companies with turnover $20 million or more. The rate is your company tax rate plus an intensity premium: +8.5 points on the portion of R&D up to 2% of total expenditure, and +16.5 points above 2%. It reduces tax payable; any excess is carried forward as a tax offset to future years rather than refunded (ATO, Refundable and non-refundable tax offsets).
There is also a minimum spend of $20,000 in eligible R&D — but RSP-conducted eligible R&D activities can be claimed even where the usual $20,000 R&D expenditure threshold is not met, where the research is conducted by a Registered Research Service Provider like Ignition Research. Note that using an RSP does not guarantee eligibility — you still self-assess. (More on that in Claiming R&D under $20,000.)
With that framing, here are the three examples. All use a 25% company tax rate and ignore other adjustments for clarity.
Example A — Pre-revenue startup in tax losses (turnover under $20m)
A software startup spends $200,000 on eligible R&D during the year. It has no revenue yet and is in a tax-loss position.
- Turnover is under $20m, so the refundable offset applies at 43.5% for a 25% base-rate entity.
- Gross R&D offset: $200,000 × 43.5% (for a 25% base-rate entity) = $87,000.
- Because the company has no tax to pay, the whole $87,000 is refundable as cash.
Result: roughly an $87,000 cash refund. This is the scenario founders care about most — the offset behaves like non-dilutive funding that arrives after lodgement. (The exact amount can change once the loss is adjusted for the R&D claim; treat $87,000 as the illustrative headline.)
Example B — Profitable SME (turnover under $20m)
Now take a profitable company, still under $20m turnover, that also spends $200,000 on eligible R&D and pays tax at 25%.
Here the right question is not "what is the offset worth?" but "what is the offset worth above the ordinary tax deduction I'd get anyway?" If those costs were simply deducted as a business expense, they would already reduce tax by 25% — that is, $200,000 × 25% = $50,000. The R&DTI replaces that deduction with the offset:
- R&DTI offset: $200,000 × 43.5% (for a 25% base-rate entity) = $87,000 (reduces tax payable).
- Ordinary deduction forgone: $200,000 × 25% = $50,000.
- Net additional benefit: $87,000 − $50,000 ≈ $37,000.
That $37,000 is the 18.5-point premium at work ($200,000 × 18.5% = $37,000). For a profitable company the headline is the incremental benefit, not the gross offset — a distinction explained further in Refundable vs non-refundable offset.
Example C — Larger company and the intensity premium (turnover $20m+)
A company with $50 million in total expenditure for the year claims $2,000,000 of eligible R&D. Turnover is over $20m, so the non-refundable offset and the intensity premium apply.
R&D intensity = R&D expenditure ÷ total expenditure = $2,000,000 ÷ $50,000,000 = 4%. The premium is tiered, so the claim is split at the 2% intensity threshold:
| Intensity band | R&D in band | Premium | Offset rate | Offset |
|---|---|---|---|---|
| Up to 2% of total expenses | $1,000,000 | +8.5 | 25% + 8.5% = 33.5% | $335,000 |
| Above 2% of total expenses | $1,000,000 | +16.5 | 25% + 16.5% = 41.5% | $415,000 |
| Total | $2,000,000 | $750,000 |
Result: a $750,000 non-refundable offset that reduces tax payable, with any unused amount carried forward. (Two percent of $50m total expenditure is $1m of R&D, so the first $1m sits in the lower band and the next $1m in the higher band.) Separately, notional R&D deductions are capped at $150 million per year for the largest claimants (ATO, Rates of R&D tax incentive offset).
What actually moves your number
These examples are deliberately clean. In a real claim the figure shifts with:
- Your company tax rate — 25% (base-rate entity) vs 30% changes every rate above.
- Your tax position — profit vs loss determines whether a refundable offset becomes a cash refund or just reduces tax.
- What counts as eligible R&D — only expenditure on eligible core and supporting activities, properly apportioned and documented, goes into the calculation.
- Adjustments — feedstock, government-grant interactions, the clawback rules, and the loss adjustment can all change the net result.
- Aggregated turnover — the < $20m / ≥ $20m line decides refundable vs non-refundable.
To sense-check a number for your own circumstances, the ATO publishes an official R&D Tax Incentive calculator — useful for a quick estimate, though it does not decide what counts as eligible R&D.
A quick note on the future: proposals have circulated about reforms and quarterly credits beyond 2027–28. These are proposed, not law. Current-year claims are assessed under the current rules described above.
Before you rely on a number
Every figure above is illustrative — the real benefit lives in the eligible R&D base behind it. Talk to Ignition Research before you rely on a number: as a Registered Research Service Provider, we help you structure and document the R&D so the eligible base behind these examples is sound, then you self-assess and seek your own tax advice.
Frequently asked questions
Q: How much does the R&D Tax Incentive pay? A: For a company with aggregated turnover under $20 million, the refundable offset is your company tax rate plus 18.5 points — about 43.5% of eligible R&D for a 25% base-rate entity. On $200,000 of eligible R&D that is roughly an $87,000 offset, payable as cash if you are in tax losses. Figures are illustrative; self-assess and seek advice.
Q: How is the R&D offset calculated? A: Multiply your eligible (notional) R&D expenditure by the applicable offset rate. Under $20m turnover, the rate is your company tax rate + 18.5% (≈43.5% at 25%). At $20m+ turnover, you apply the intensity premium: +8.5% on R&D up to 2% of total expenses and +16.5% above 2%.
Q: What is the refundable offset worth to a startup in tax losses? A: It is effectively a cash refund. A pre-revenue startup spending $200,000 on eligible R&D could see roughly $87,000 returned as cash after lodgement, because the refundable offset exceeds the (nil) tax payable. The exact amount depends on the loss adjustment and your circumstances.
Q: How does the intensity premium work over $20m? A: The non-refundable offset adds a premium to your company tax rate based on R&D intensity (R&D ÷ total expenditure): +8.5 points up to 2% intensity, +16.5 points above 2%. In our example, $2m of R&D at 4% intensity produces a $750,000 offset — $335,000 from the lower band and $415,000 from the higher band — with any excess carried forward.
Sources & further reading
- Rates of the R&D tax incentive offset — ATO (rates, 18.5-point premium, intensity tiers, $150m cap)
- Overview of the R&DTI — business.gov.au (refundable vs non-refundable, $20m threshold, $20,000 minimum)
- Refundable and non-refundable tax offsets — ATO (cash refund vs carry-forward treatment)
- R&D Tax Incentive calculator — ATO (official tool to estimate your offset)
- Related: Refundable vs non-refundable offset · R&D Tax Incentive overview · Claiming R&D under $20,000
This article is general information from a Registered Research Service Provider about the R&D Tax Incentive. It is not tax, legal or financial advice; the figures are illustrative, eligibility and benefit depend on your circumstances, and you should self-assess and seek your own advice.
