Quick answer: Generally, a discretionary trust or an ordinary partnership cannot register or claim the R&D Tax Incentive, because the incentive is only available to an "eligible R&D entity" — broadly, a company. If your operating business trades through a trust or partnership, the fix is structural: the eligible R&D activities usually need to sit inside an incorporated company, set up before the work is done, not retro-fitted after you've spent the money.
20 July 2026 — the 2026–27 Federal Budget proposed R&DTI changes that, if legislated, would apply to income years starting on or after 1 July 2028. This article describes the current rules unless stated otherwise.
If you run a genuine experimental-development program but your business trades through a family trust or a partnership, there is an uncomfortable possibility worth confronting early: a whole year of otherwise-eligible R&D spend can be unclaimable simply because it sat in the wrong entity.
The R&D Tax Incentive does not attach to "the business" in the abstract. It attaches to a specific kind of taxpayer — an eligible R&D entity — and most trusts and partnerships are not one. At Ignition Research, an Adelaide-based Registered Research Service Provider (RSP000047, Lot Fourteen), the structuring question is one we raise before the lab coats go on, because it is very hard to fix afterwards.
The Short Answer: The Trust or Partnership Generally Can't Claim — the Company Can
Under the R&DTI, only an R&D entity can register activities with AusIndustry and claim the tax offset. The program is jointly administered by AusIndustry and the ATO, and business.gov.au sets out the eligibility gate plainly: you must be an R&D entity to be eligible.
A discretionary or family trust is not, in itself, an R&D entity.
An ordinary partnership of individuals is not, in itself, an R&D entity.
An eligible company can register the activities and claim the offset where it conducts and funds the work on its own behalf.
If the operating vehicle that pays for and conducts the R&D is a trust or partnership, there is generally no eligible claimant for that spend — no matter how strong the underlying science is. The vehicle question sits upstream of everything else: rates, offsets, thresholds and refunds are all irrelevant until an eligible company is the one conducting and claiming the work.
Eligibility depends on your circumstances and must be self-assessed. This article explains the principle; your specific structure should be checked against the law and, where the stakes are high, against your own tax and legal advice.
What Counts as an "Eligible R&D Entity"?
The "R&D entity" concept is defined in Division 355 of the Income Tax Assessment Act 1997. Broadly, an R&D entity is a company, and more specifically one of:
• a company incorporated under an Australian law;
• a company incorporated under a foreign law that is an Australian resident for tax purposes; or
• a foreign-resident company from a country with which Australia has a double-tax agreement, carrying on business through a permanent establishment here.
Important overriding exclusion: even a company that fits one of those descriptions is not an R&D entity if it is exempt from income tax — that is, where all of its income is exempt from income tax under ITAA 1997 s 355-35.
Two further rules matter for owners trading through trusts:
Trustee exclusion: an entity is not an R&D entity to the extent it is acting as a trustee.
Narrow exception: a company that is trustee of a public trading trust for the income year may be treated as an R&D entity.
A public trading trust is a tightly defined tax-law category — not an ordinary family or discretionary trust. Do not assume your family trust qualifies merely because it has a corporate trustee. The public-trading-trust exception is narrow and should be checked against the legislation and with your adviser before you rely on it.
Why Trusts and Ordinary Partnerships Fall Outside
Registration and the offset both attach to the R&D entity — the company. You register the R&D activities with AusIndustry as the company, and you then claim the offset in the company's tax return.
A trust lodges a trust return and streams income to beneficiaries; a partnership lodges a partnership return and distributes to partners. Neither of those returns is the vehicle the R&DTI offset flows through, and neither the trust nor the partnership is the R&D entity that can register the activities in the first place.
The wrong-entity problem: even where the R&D is real, experimental and well documented, if the trust or partnership conducted the activities and incurred the expenditure on its own behalf, there is generally no eligible R&D entity standing behind that spend.
The Offset, Once You Are in a Company: What's Actually at Stake
Getting the vehicle right is what unlocks the numbers. The R&DTI offset comes in two forms:
Offset type
Who it's for, broadly
Rate framing
Refundable
Companies with aggregated turnover under $20 million that are not controlled by one or more income-tax-exempt entities
Company tax rate + 18.5 percentage points — 43.5% for a 25% base-rate entity. It can be refunded as cash where it exceeds tax payable.
Non-refundable
All other eligible companies, including those controlled by income-tax-exempt entities regardless of turnover
Company tax rate + 8.5 percentage points on notional R&D expenditure up to and including 2% R&D intensity, and +16.5 percentage points above 2%. Excess is carried forward rather than paid as cash.
Two figures are worth internalising. The 43.5% headline is only accurate for a company that is a 25% base-rate entity with aggregated turnover under $20 million. You also generally need at least $20,000 of notional R&D expenditure to access the offset, although eligible R&D activities conducted through an RSP may be claimable even where the usual $20,000 threshold is not met.
All of this presupposes one thing: a company is the claimant. If you're a trust or partnership, none of these offset mechanics are available to you yet.
The Fix: Structure the R&D Inside a Company — Before the Activity
The structuring has to happen before the R&D work is undertaken, for two connected reasons.
1. Registration closes the door. Registration is annual and must generally be lodged within 10 months after the end of the company's income year. If the company did not exist and did not conduct the activities in that year, there is no valid registration for that company to make.
2. The company must actually conduct and fund the R&D. It is not enough to incorporate a company later and point to expenditure previously incurred by the trust. The R&D entity needs to conduct the eligible activities and incur the expenditure on its own behalf.
In practice, this means deciding who owns the IP, who employs or engages the researchers, how the R&D company is funded, and how related-party arrangements are documented. These are structuring decisions to make at the beginning, not paperwork to reverse-engineer after year-end.
Restructuring Is Not Consequence-Free — Get Advice First
Moving an operating business, or an R&D function, out of a trust and into a company is a restructure. Restructures can create tax and legal consequences of their own — potential capital gains tax, potential stamp duty or transfer duty, and legal issues involving assets, employees and contracts.
The practical point: possible concessions may apply in some circumstances, but they are conditional and fact-specific. Fix the structure deliberately with proper tax and legal advice rather than as a rushed year-end exercise.
Worked Example — Illustrative Only
Scenario A — R&D conducted by the trust
A family runs a manufacturing business through the Smith Family Trust and spends money developing a genuinely novel production process. At tax time, the family asks its accountant to claim the R&D. The problem is that the trust conducted and paid for the activities, and the trust is not an eligible R&D entity. There is no company to register the activities or claim the offset. That year's spend is effectively stranded.
Scenario B — R&D structured inside a company before the work
Before the process-development work begins, the family establishes Smith Innovation Pty Ltd as the R&D entity. The company employs the engineers, owns the resulting IP, is funded to perform the work, conducts the experiments and incurs the expenditure on its own behalf. It then registers those activities with AusIndustry within the deadline and claims the offset in its own company return.
Same science, same family — but only the second structure has an eligible claimant. The decisive step was made at the structuring stage, not in the tax return.
Where an RSP Fits — and Where It Doesn't
A Registered Research Service Provider is an organisation entered on the AusIndustry RSP register as able to conduct R&D on behalf of companies within defined research fields. Ignition Research helps owners set the R&D up correctly — including the upstream question of which entity should carry the work — and can conduct eligible R&D activities on behalf of an eligible company.
What an RSP cannot do: RSP involvement does not turn ineligible work into eligible work and does not turn a trust into an eligible R&D entity.
Where tax and legal advisers fit: CGT, duty and legal-structure decisions arising from a restructure should be handled by your tax and legal advisers, ideally working alongside the R&D scoping.
Frequently Asked Questions
Q: Can a discretionary or family trust claim the R&D Tax Incentive in Australia?
A: Generally no. The incentive is only available to an eligible R&D entity — broadly, a company — and a discretionary trust is not one. An entity acting as trustee is generally excluded, with a narrow exception for a company that is trustee of a public trading trust, which a typical family trust is not.
Q: Can a partnership claim the R&D Tax Incentive?
A: Generally no. An ordinary partnership is not an eligible R&D entity, so it cannot register R&D activities or claim the offset in the partnership return. The offset attaches to a company as the R&D entity.
Q: I've been doing R&D inside my trust — can I restructure into a company and still claim?
A: You can restructure so that future R&D is conducted by an eligible company, but you generally cannot retro-fit a company onto a closed year in which the trust already incurred the expenditure. The company must actually conduct and fund the work during the relevant income year.
Q: Do I have to set up the company before I start the R&D, or can I fix it at tax time?
A: Before. The company needs to be the entity that conducts the activities and incurs the expenditure during the income year, and it must register those activities with AusIndustry within the applicable deadline.
Sources & Further Reading
business.gov.au — Check if you are eligible for the R&DTI
business.gov.au — Apply to register with the R&DTI
business.gov.au — Getting help from a Research Service Provider
ATO — Rates of R&D tax incentive offset
legislation.gov.au — Income Tax Assessment Act 1997, Division 355
Related: what the R&D Tax Incentive is
Related: what does not qualify
Related: the registration deadline
Related: how a Registered Research Service Provider fits
Talk to Ignition Research before you register or restructure. If you're trading through a trust or partnership and doing genuine experimental development, the entity question is best settled before the work begins. A company set up now can carry future R&D activities, but it cannot claim work the trust or partnership has already conducted or expenditure it has already incurred.
Note: this article describes the current rules. Changes proposed in the 2026–27 Federal Budget for income years starting on or after 1 July 2028 are not yet law.
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.
