Quick answer: The ATO can apply Division 290 promoter-penalty laws to advisers who promote ineligible or aggressive R&D claims — but the company that lodges still bears the primary risk of repaying an incorrect offset, plus interest and penalties. To avoid a dodgy R&D consultant, vet advisers on their eligibility methodology, the records they help you keep, and whether they put their eligibility reasoning in writing.
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.
Every so often a founder forwards us a pitch that promises the world: "We'll get you a guaranteed R&D refund, no records needed, and we only get paid a slice of what comes back." It sounds frictionless. It is also exactly the kind of arrangement that has landed advisers — and their clients — in serious trouble.
The R&D Tax Incentive (R&DTI) is a genuine, generous programme. But because it pays a cash offset, it attracts a small number of operators who oversell eligibility and under-do the substantiation. This article is a plain-English guide to two things every claimant should understand before signing with anyone: how the promoter penalty laws work, and how to vet an R&D adviser so you don't end up carrying someone else's risk.
This is general information from a Registered Research Service Provider. The mechanics below are set out in legislation and ATO guidance; your situation depends on your circumstances, so you should self-assess and seek your own advice.
Who actually bears the risk? (Usually, the company)
Here is the uncomfortable truth that a slick pitch tends to skip over: the taxpayer — your company — generally bears the primary financial risk of an incorrect claim. If the ATO later finds activities or expenditure were ineligible, it is the company that generally has to repay the offset, plus interest and potentially administrative penalties. The adviser who talked you into it may face their own consequences, but that does not undo your liability.
So a claim that is "approved" by a consultant is not the same as a claim that is correct. Registration of R&D activities with AusIndustry is largely a self-assessment process; the substance is tested if and when the ATO or AusIndustry reviews it. An aggressive claim can sit quietly for a couple of years and then unravel — with the cash long since spent. That asymmetry is why the quality of who you work with matters more than the size of the headline refund.
What are promoter penalties?
Separately from your own liability, the law targets the people who promote aggressive arrangements. The promoter penalty laws are set out in Division 290 of Schedule 1 to the Taxation Administration Act 1953. They are designed to deter the promotion of tax avoidance or tax exploitation schemes, including arrangements where it is not reasonably arguable that the claimed tax benefit is available or where a tax benefit is promoted in a misleading or abusive way. (ato.gov.au)
A few features are worth knowing:
They can apply to a single arrangement, not just mass-marketed schemes — even one client can be enough.
The laws were strengthened from 1 July 2024. According to the ATO, the Treasury Laws Amendment (Tax Accountability and Fairness) Act 2024 extended the time available to commence promoter-penalty proceedings from 4 years to 6 years and increased the maximum civil penalties — for the largest entities, up to around $780 million. (ato.gov.au)
They have been applied to R&D. In December 2024 the Federal Court, in the matter involving Mr Julian Bakarich and associated entities, imposed civil penalties of ~$13.6 million in penalties (per the ATO and the Court) — described as the first application of the Division 290 promoter penalty laws to the R&DTI. The case concerned the promotion of over-inflated and unsubstantiated R&D claims, and separately the affected taxpayers faced shortfalls, penalties and interest.
We mention that case carefully and qualitatively: it is a public Federal Court matter, and the point is not to alarm but to show that the integrity rules have real teeth. AusIndustry and the ATO have also issued ongoing "be aware" / integrity guidance warning businesses about over-claiming and about advisers who overstate eligibility.
Red flags in an R&D adviser
Most good advisers are nothing like the bad ones — but the bad ones tend to share a recognisable pattern. Treat the following as warning signs worth questioning:
Guarantees. Any promise of a "guaranteed" refund, a guaranteed dollar figure, or "guaranteed eligibility" before the work is even scoped. Eligibility is self-assessed against the law; nobody can guarantee an outcome.
Percentage-of-refund-only fees with no substantiation work. A no-win-no-fee or percentage-of-refund arrangement is not automatically improper, but it creates incentive risk if substantiation is weak — a model that pays the adviser a slice of the refund and skips the technical narrative and records tilts the incentive toward maximising the claim rather than making it defensible.
"Everything qualifies." Claims that all your software development, or your ordinary commercial and business-as-usual activities, automatically count as R&D. The law requires genuine experimental activities resolving technical uncertainty — not routine work.
No documentation produced. If the adviser does not help you create a technical narrative, contemporaneous records, or an activity-to-expenditure mapping, your claim has nothing to stand on in a review.
Reluctance to put reasoning in writing. A credible adviser will explain — on paper — why each activity is eligible. Vagueness here is a tell.
How to vet an R&D adviser: a checklist
Before you engage anyone, ask these questions and listen for specific, confident answers:
Methodology and evidence
What is your eligibility methodology? They should be able to describe how they assess core vs supporting activities against the legislation, not just "we've done lots of these."
What records will you help us create? Look for technical narratives, experiment logs, time and cost tracking, and an activity-to-expenditure map.
Will you put your eligibility reasoning in writing? A "yes" is a green flag.
Accountability
Who signs off, and who lodges? Understand the split between the R&D advisory work and the tax-agent lodgement, and who stands behind each.
Can you provide references? Talk to other businesses they've worked with, ideally in your sector.
How do you charge, and what happens in a review? Clarify fees and whether they support you if the ATO or AusIndustry asks questions later.
Structural trust signals
One signal you can verify independently is whether the firm is a Registered Research Service Provider (RSP). An RSP is registered and assessed by AusIndustry under the R&DTI to provide research services — a government-administered credential rather than a self-description. It does not make any single claim correct, and it is not a substitute for your own diligence, but it is a structural marker of accountability worth weighing alongside everything above. We explain the distinction in RSP vs an R&D tax consultant.
For context, Ignition Research is a Registered Research Service Provider. Our role is research capability and structuring the underlying R&D so it is defensible — we work alongside your tax agent, who handles the lodgement and tax advice. You can read more on our RSP overview or simply talk to us about how a claim should be built.
A final planning note: the 2026–27 Federal Budget announced R&DTI changes scheduled to start 1 July 2028. As at the date of this article these are announced measures, not yet law, and shouldn't drive current-year decisions.
Talk to Ignition Research — as a government-registered RSP we put our eligibility reasoning in writing before you rely on it. If you'd like a defensible R&D claim built from the ground up, talk to us.
Frequently asked questions
Q: What are promoter penalties for R&D tax claims? A: They are civil penalties under Division 290 of Schedule 1 to the Taxation Administration Act 1953 that target people who promote tax-exploitation schemes — including aggressive or ineligible R&D claims. They can apply even to a single arrangement, and the maximum penalties are very large. In 2024 the Federal Court applied them to an R&D matter for the first time.
Q: Who is liable if my R&D claim is wrong — me or my adviser? A: Primarily you. The company that lodges generally has to repay the offset plus interest and any penalties if activities or expenditure are found ineligible. An adviser may face their own consequences, but that does not remove your liability — which is why a defensible claim matters more than a big one.
Q: Is a no-win-no-fee or percentage-of-refund R&D claim risky? A: A no-win-no-fee or percentage-of-refund arrangement is not automatically improper, but it creates incentive risk if substantiation is weak: the incentive can shift toward maximising the claim rather than making it defensible. Be especially cautious if no technical narrative or records are produced.
Q: How do I vet an R&D tax adviser? A: Ask for their eligibility methodology, the records they'll create, whether they'll put reasoning in writing, who signs off and lodges, and references. Check whether they're a Registered Research Service Provider (registered and assessed by AusIndustry) as a structural trust signal — then still self-assess and seek your own advice.
Sources & further reading
ATO — Promoter penalty laws (ato.gov.au)
business.gov.au — Getting help from a research service provider (business.gov.au)
Related: RSP vs an R&D tax consultant · Registered Research Service Provider · Talk to us
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 depends on your circumstances and you should self-assess and seek your own advice.
