Quick answer: Aggregated turnover for the $20m R&DTI threshold is your own annual turnover plus the worldwide turnover of every entity connected with you or affiliated with you, excluding inter-entity dealings so nothing is double-counted. Under $20m, your offset is generally a refundable cash offset; at $20m or more it's non-refundable and carries forward. Funded startups often trip on a large parent or investor entity.
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.
For early-stage and growing companies, one number quietly decides the shape of your R&D Tax Incentive (R&DTI) benefit: your aggregated turnover. Sit below $20 million and your offset is generally refundable — meaning if you're in a tax-loss position, the benefit can come back to you as a cash refund. Sit at or above $20 million and your offset is generally non-refundable — it reduces tax payable, and any excess carries forward to future years rather than being paid out.
The trap is in the word aggregated. This is not just your own revenue. It can sweep in the turnover of other entities you're grouped with — including ones overseas. We've seen well-funded startups assume they're comfortably under the line, only to discover a large parent or investor entity pushes the group over it. As a Registered Research Service Provider (RSP000047), our role is research capability and structuring, not tax advice. The mechanics below come from the ATO and the legislation; how they apply to you depends on your circumstances, so self-assess and seek your own advice.
Why the line matters: refund vs carry-forward
For an eligible R&D entity, the threshold drives which offset rate and treatment applies:
Aggregated turnover under $20 million → generally a refundable R&D tax offset. If your offset exceeds your tax liability (common for loss-making R&D companies), the excess can be refunded as cash.
Aggregated turnover $20 million or more → generally a non-refundable R&D tax offset. It offsets tax payable, and any unused amount is carried forward to reduce tax in later income years.
For a pre-revenue company burning capital on R&D, this is the difference between cash in the bank this year and a credit you can only use once you're profitable. The full mechanics of each treatment — including the offset rates and the way the non-refundable amount carries forward — are covered in our refundable vs non-refundable offset guide. The ATO sets out the two categories in its "Refundable and non-refundable tax offsets" guidance.
What's changing in 2028 (proposed, not yet law). The 2026–27 Federal Budget announced reforms to the R&DTI scheduled to start 1 July 2028, including a proposal to lift the turnover threshold for the refundable offset above the current $20 million. The figures are proposed and announced only — they are not legislated, and the $20 million line described in this article remains the current rule until any change is passed into law. Don't plan around the proposed numbers; confirm what applies to your income year and seek your own advice.
What aggregated turnover includes
The ATO defines aggregated turnover as your annual turnover plus the annual turnovers of any entities that are connected with you or are your affiliates — calculated on a worldwide basis, and excluding dealings between those grouped entities (so you don't double-count intra-group sales).
In general terms, aggregated turnover is calculated by combining three categories of turnover, subject to specific attribution and anti-double-counting rules.
Your own annual turnover;
The annual turnover of each entity connected with you; and
The annual turnover of each of your affiliates.
Then you subtract turnover from transactions between you and those entities, and between the grouped entities themselves, to avoid double counting.
The control test (connection)
Whether another entity is "connected with" you turns largely on control. Broadly, an entity is taken to control another where it holds (together with its affiliates) at least 40% of the income, capital or voting rights, although this is a presumption and actual control can still depend on the broader control relationship. Control can run in either direction — an entity that controls you, and an entity you control, can both be connected with you. The detailed definitions sit in the Income Tax Assessment Act 1997 (the aggregated turnover, connected entity and affiliate rules in Subdivision 328-C).
The 40% control test is not always mechanical. Where the control percentage sits roughly between 40% and 50%, the Commissioner may look beyond the cap table to practical or actual control — who really directs the entity in fact — so a holding just over 40% doesn't automatically mean connection, and a holding just under it isn't automatically safe. Don't rely on the ownership percentages alone; confirm the connection position with your tax adviser.
An affiliate is a different concept — typically an individual or company that acts, or could reasonably be expected to act, in accordance with your directions or wishes, or in concert with you, in relation to their business affairs.
Foreign related entities count
This is the part that catches groups out: the test is worldwide. Turnover of a connected entity or affiliate is included even if that entity is a foreign resident and earns its revenue overseas. A foreign parent, a foreign subsidiary, or an offshore entity under common control can all contribute to your aggregated turnover. The test is not limited to Australian entities — it can include foreign entities where they are connected with you or are your affiliates under the tax rules.
A worked example: the funded startup trap
Imagine an Adelaide software company, NovaLabs, with its own annual turnover of just $1.2 million — comfortably under $20 million on its own figures. A growth fund takes a controlling stake and, through that fund's structure, a large operating company that turns over $60 million worldwide is connected with NovaLabs under the control test.
When NovaLabs works out its aggregated turnover, it adds the connected entity's turnover to its own. The group total is now well over $20 million. The result: NovaLabs' R&D offset is likely non-refundable — so in a loss year, instead of a cash refund, the benefit becomes a carry-forward credit. Nothing about NovaLabs' own size changed; the grouping did. This is illustrative only — the actual outcome depends on the precise ownership and control facts, which you should confirm.
How to check where you sit
Before you assume which side of the line you're on:
Map your group. List every entity connected with you (apply the ~40% control test, both up and down the ownership chain) and every affiliate.
Go worldwide. Include foreign related entities' turnover, not just Australian operations.
Strip out intra-group dealings. Exclude turnover from transactions between the grouped entities so you don't double-count.
Check investor and parent structures. A controlling fund, holding company or overseas parent is the most common reason a small company breaches $20 million.
Confirm eligibility separately. The threshold only affects which offset applies — you must still be an eligible R&D entity with eligible activities. See our R&D Tax Incentive overview.
Getting aggregated turnover right is about accuracy: it determines not just how much benefit you receive, but when and in what form you receive it.
Talk to Ignition Research before you assume which offset applies — we help structure the R&D; your tax adviser confirms the turnover grouping. If you're a funded or grouped company unsure where you sit, get in touch and we'll make sure the research side is built right.
Frequently asked questions
Q: What counts towards aggregated turnover for the R&DTI? A: Your own annual turnover plus the annual turnovers of any entities connected with you or that are your affiliates, calculated worldwide. You exclude turnover from dealings between those grouped entities so amounts aren't counted twice. The ATO's "Grouping for aggregated turnover" guidance sets out the method.
Q: Do connected and affiliated entities count? A: Yes. Both connected entities and affiliates are included. Connection generally turns on control — broadly a right to at least 40% of income, capital or voting power — while an affiliate is someone who acts in accordance with your wishes or in concert with you in their business affairs.
Q: Do foreign related companies count towards the $20m? A: Yes. Aggregated turnover is worldwide, so a connected entity or affiliate that is a foreign resident is included even if its revenue is earned overseas. A large foreign parent or subsidiary can push a small Australian company over the $20 million line.
Q: Refundable or non-refundable — which applies to me? A: Broadly, if your aggregated turnover is under $20 million you may access the refundable offset (a cash refund is possible when you're in losses); at $20 million or more the offset is non-refundable and any excess carries forward. You should self-assess against your group's figures and seek your own advice.
Q: Does it matter if a tax-exempt entity controls us? A: It can. Control of your company by one or more exempt entities can change the offset treatment regardless of where your aggregated turnover sits, so the under-$20m / $20m-or-more split isn't the whole story. If a tax-exempt body (such as certain government, charitable or not-for-profit entities) has control, check the position with your tax adviser before assuming which offset applies.
Sources & further reading
ATO — Grouping for aggregated turnover purposes: ato.gov.au
ATO — Refundable and non-refundable tax offsets: ato.gov.au
Federal Register of Legislation — Income Tax Assessment Act 1997 (aggregated turnover, Subdivision 328-C): legislation.gov.au
Related: Refundable vs non-refundable offset · R&D Tax Incentive overview
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; eligibility and tax treatment depend on your circumstances and you should self-assess and seek your own advice.
