Quick answer: Yes — a founder or director's salary can form part of an R&D Tax Incentive claim, but only to the extent it genuinely pays for eligible R&D work you conduct. Because a founder-director is usually an "associate" of the company, the ATO's rules generally allow the amount to be claimed only in the year it is actually paid, not merely booked in the accounts. Amounts must also be reasonable and at risk. You self-assess; this is general information, not tax advice.
Updated 20 July 2026 — the 2026–27 Federal Budget announced proposed R&DTI changes for income years starting on or after 1 July 2028. These changes are not yet law; this article describes the current rules unless stated otherwise.
A common question from founders is: "I'm the one doing the R&D — does my own pay count?" It may, but only to the extent the remuneration relates to eligible R&D activities and satisfies the applicable expenditure and payment rules. An unpaid year-end accrual may also be subject to the associate timing rules. This article focuses narrowly on one sub-topic: founder, director and associate wages — and the associate-timing, market-rate and paid-versus-accrued traps that are specific to owner pay. For the broader question of which R&D costs qualify in the first place — contractors, materials, overheads and the like — we cover that separately in our R&D expenditure guide on what can and can't be claimed. Here, we walk through the salary mechanics so you can see the shape of the risk before you talk to your registered tax agent or R&D adviser.
The Short Answer for Owners
Founder and director remuneration can form part of an R&D Tax Incentive (R&DTI) claim — but only to the extent it funds eligible R&D activity, and only after it clears three owner-side hurdles that routinely trip up small companies:
1. Associate status
A founder-director may be an associate of the company, depending on ownership, control and other relevant relationships. If so, special timing rules apply.
2. Genuinely incurred and at risk
Only the amount that genuinely funds R&D, and that the company actually bears, is in scope; expenditure that is not at risk can be excluded (the at-risk rule, s 355-405 of the Income Tax Assessment Act 1997).
3. Actually paid, not just accrued
For R&DTI purposes, expenditure incurred to an associate is generally notionally deductible only when it is paid. If it remains unpaid, a deduction under another tax provision may be available in the year incurred, if applicable, but the same amount cannot also be claimed later under the R&DTI.
None of this is a determination about your company. Ignition Research is a Registered Research Service Provider (RSP), not a registered tax agent — we help you plan, conduct and document R&D activities within our registered research fields, but you self-assess your claim and should get your own tax advice. Treat everything below as considerations to raise with your adviser.
What Actually Goes into an R&D Salary Claim
Wages don't enter an R&DTI claim as a lump sum. They enter as notional deductions — the portion of a person's pay that maps to the time they spent on eligible R&D activities.
The law distinguishes core R&D activities — experimental activities whose outcome cannot be known or determined in advance on the basis of current knowledge, information or experience, but can only be determined by applying a systematic progression of work that is based on principles of established science and proceeds from hypothesis to experiment, observation and evaluation, and leads to logical conclusions, and that is conducted for the purpose of generating new knowledge (s 355-25 of the Income Tax Assessment Act 1997) — from supporting R&D activities, which must be directly related to core R&D activities (s 355-30). For some supporting work there is an extra hurdle: an activity that produces goods or services, or that is directly related to producing goods or services, or that is one of the excluded activities listed in s 355-25(2), qualifies as supporting only if it is undertaken for the dominant purpose of supporting core R&D (s 355-30(2)). A founder's week usually straddles both — plus a lot that is neither. So the exercise is:
Step 1: Identify which activities are eligible R&D.
Step 2: Apportion each person's time (including your own) to those activities on a reasonable, evidence-based basis.
Step 3: Claim only that apportioned share of their salary and wages.
The evidence the rules expect: Apportionment has to be defensible. The ATO's guidance on the expenditure you can claim points to keeping contemporaneous records — timesheets or activity logs kept as the work happens, not reconstructed a year later from memory. For a founder splitting time across R&D, sales, admin and fundraising, a simple weekly time record can be important supporting evidence.
Salary is not dividends or drawings: One clean line to hold: salary and wages for R&D work may be claimable; dividends, drawings and distributions are returns to you as an owner, not payment for R&D activity, and don't belong in the claim. On-costs such as superannuation and payroll tax may also be claimable where they relate to the R&D portion of the wage — the precise treatment of each on-cost is something to confirm with your adviser rather than assume.
The Associate Trap: Why "Who You Are" Changes the Rules
Here's the point most owners don't see coming. A founder-director may be an associate of the company, particularly where the relevant ownership or control tests are met. Being an associate does not automatically disqualify the expenditure, but it changes the timing rules.
For most business expenses you can claim when the cost is incurred — that is, when you become liable to pay it. Expenditure to an associate works differently. The ATO's guidance on R&D expenditure incurred to an associate makes the rule plain: the amount must be both incurred and paid before you can claim it as a notional R&D deduction. If you incur it and pay it in the same income year, you can claim it that year. If you don't pay it in the year you incurred it, you can't claim it as an R&D notional deduction until the year you actually make the payment — s 355-480 of the Income Tax Assessment Act 1997 lets you notionally deduct that earlier-year associate amount in the later year you pay it.
In plain terms: A founder's salary that is recorded as an accrual but not paid is generally not available as an R&D notional deduction in that year. If the amount remains unpaid, the company may need to choose between any ordinary deduction otherwise available for the year incurred and an R&D notional deduction in the later year of payment. The same expenditure cannot be claimed under both treatments. Exactly what counts as "paid" can be fact-specific: whether a set-off, a loan-account entry, or another non-cash arrangement amounts to payment depends on the particular facts, so confirm the treatment of any non-cash "payment" with your registered tax agent rather than assume it clears the rule.
Reasonableness and Market Rate: Paying Yourself at Arm's Length
Even once an amount is paid, it still has to be a genuine R&D cost. Two related expectations matter for owners:
At risk: A notional deduction may be denied or reduced where the company or an associate receives, or could reasonably be expected to receive, consideration linked to the expenditure regardless of the results of the R&D activities (what doesn't qualify).
Market value and arm's-length amount: There is no separate founder-salary cap under the R&D rules. However, where parties do not deal with each other at arm's length in relation to R&D expenditure, the notional deduction may be limited under the arm's-length expenditure rule in s 355-400 of the Income Tax Assessment Act 1997 to the amount the expenditure would have been if the parties had dealt at arm's length. Founder remuneration should therefore be supported by evidence of the services performed, the time attributable to eligible R&D activities and the basis on which the remuneration was determined. Confirm the treatment with your registered tax agent.
The framing to keep in mind: eligible expenditure, paid where required, at risk and supportable at market value.
A Common Owner Scenario (Illustrative Only)
The numbers below are illustrative — not a benchmark, safe-harbour, or ATO-endorsed figure. Your circumstances will differ.
Priya founds an Adelaide software company. Across the year she draws a modest salary and leaves the rest of her "pay" as an unpaid accrual to preserve cash. Her time splits roughly:
Activity
Share of Priya's year
Eligible R&D?
Experimental development of a novel algorithm
45%
Likely core R&D
Testing / integration supporting that work
15%
Possibly supporting R&D
Sales, fundraising, admin
40%
Not R&D
Walking it through:
1. Apportion: On the face of it, up to ~60% of Priya's time relates to activities that may potentially support an R&D claim — but only the remuneration attributable to that time is relevant, and each activity still has to be self-assessed against the statutory eligibility criteria.
2. Associate status: On the stated assumptions — Priya owns and controls the company she founded — she is likely an "associate" of it under the tax-law associate rules (associate status turns on ownership and control, not on her job title). The applicable associate payment rules then need to be considered.
3. Paid vs accrued: Only remuneration that satisfies the relevant payment requirements may be available as an R&D notional deduction for the relevant year. An accrued-but-unpaid amount may not qualify in that year, even though the work was performed during that period.
4. Result: A simplified starting calculation is: eligible R&D time share × remuneration actually paid, capped at the market value of the relevant services and subject to the other expenditure rules. If a year-end payment is being considered, the company should confirm with its registered tax agent that it reflects a genuine remuneration liability and satisfies the applicable payment and documentation requirements.
This is illustrative reasoning, not advice on Priya's — or your — position.
Records, Timing and Registration to Get Right
A few practical, owner-controllable things sit around the edges of all this:
Keep contemporaneous records of who did what R&D and when — especially your own time.
Check before year-end whether associate amounts intended to be included in an R&DTI claim have been genuinely paid and correctly documented; do not rely on journal entries alone.
Register with AusIndustry, Science and Resources: You must generally apply to register your R&D activities within 10 months after the end of the income year in which the activities were conducted.
Mind the minimum spend: There is generally a minimum eligible R&D expenditure threshold of $20,000 under the current rules. An exception may apply to eligible expenditure on R&D activities performed by a registered Research Service Provider, or to eligible contributions under the Cooperative Research Centres Program, subject to the statutory conditions. Using an RSP does not itself establish eligibility.
Under the current offset rates: a company with aggregated turnover under $20 million that is not controlled by one or more income-tax-exempt entities can access the refundable R&D tax offset — the company tax rate plus 18.5 percentage points, which for a 25% base-rate entity is 43.5% (attributable to the ATO). Companies that don't meet both conditions (larger turnover, or control by exempt entities) instead access a non-refundable offset: the company tax rate plus 8.5 percentage points on R&D expenditure within the 2% R&D-intensity threshold, and plus 16.5 points above 2%. A non-refundable offset reduces the tax the company would otherwise pay, with any unused amount carried forward to later years — it does not necessarily produce a cash payment. The $150 million figure is an R&D expenditure threshold, not a cap: expenditure above it still attracts an offset, but at the company tax rate (no premium) rather than nothing. Your founder salary, once it clears the hurdles above, may form part of the eligible notional deductions once the applicable activity, expenditure, payment and market-value requirements are satisfied.
A word on the future: The 2026–27 Federal Budget announced proposed R&DTI changes for income years starting on or after 1 July 2028. The current rules will continue to apply unless and until amending legislation takes effect. As announced by the Government, the proposed changes include increasing the offset for eligible core R&D activities and removing eligibility for supporting R&D activities; reducing the R&D intensity threshold to 1.5%; increasing the aggregated-turnover threshold for the higher refundable offset to $50 million, while limiting refundability to firms operating for less than 10 years; increasing the maximum expenditure cap from $150 million to $200 million; and increasing the minimum expenditure threshold from $20,000 to $50,000, with businesses undertaking R&D projects below $50,000 required to work with recognised research service providers or CRCs. Final details should be confirmed against the enacted legislation. We break down what's coming in our Budget 2026 reforms explainer. Plan around today's rules; watch the reforms.
Where an RSP Fits — and What to Do Next
It helps to be precise about roles. A Registered Research Service Provider like Ignition Research is registered to provide research capability and to help you conduct and structure eligible R&D. We are not a registered tax agent: we don't determine your eligibility, calculate your offset, or lodge your tax position — that's the domain of your registered tax agent, working from a claim you self-assess. An RSP can assist with technical R&D work and contemporaneous records within its registered research fields. The company remains responsible for self-assessment, while tax eligibility, offset calculations and lodgment should be addressed with a registered tax agent.
Start with the R&D Tax Incentive overview if you're new to the program, then bring your specific salary structure to your adviser.
Frequently Asked Questions
Q: Can I include my own salary as a company founder in an R&D claim in Australia?
A: Potentially yes — the portion of your salary that pays for eligible R&D activities you conduct can form part of a claim. But you may be an associate of the company, depending on the relevant ownership, control and relationship tests, so the amount may generally be claimable only in the year it is actually paid, and it must also satisfy the applicable expenditure requirements, including reasonableness and at-risk rules.
Q: Do director's fees or a working director's wages count as eligible R&D expenditure?
A: Only to the extent they pay for time spent on eligible R&D activities, apportioned on a reasonable, evidence-based basis. Fees for governance or non-R&D duties don't count, and dividends and drawings aren't R&D expenditure at all.
Q: If I haven't actually paid myself yet, can I still claim the accrued salary for R&D?
A: Generally, an accrued but unpaid amount is not available as an R&D notional deduction until it is paid. If the amount remains unpaid, an ordinary deduction under another tax provision may be available if the relevant requirements are satisfied. The same expenditure cannot be claimed under both treatments.
Q: Does the ATO expect my founder salary to be at market rate?
A: The R&D rules do not impose a separate founder-salary cap. However, where expenditure is incurred to an associate, or under a non-arm’s-length arrangement, the R&D notional deduction is limited to the market value of the relevant R&D services. Amounts above market value are not notionally deductible. Keep evidence supporting the services performed, the R&D time allocation and the remuneration amount, and confirm the treatment with your registered tax agent.
Sources & Further Reading
Check if you are eligible for the R&D Tax Incentive (business.gov.au)
Income Tax Assessment Act 1997 — Division 355 (Federal Register of Legislation)
Related: R&D Tax Incentive overview
Related: What doesn't qualify
Related: Proposed Budget 2026 R&DTI reforms
Founder remuneration claims require careful attention to activity eligibility, payment timing, market value and supporting records. A salary accrual left unpaid at year-end may affect the timing or availability of an R&D notional deduction, so before relying on accrued salary as part of an R&DTI claim, confirm its treatment with your registered tax agent. Ignition Research can assist with the technical R&D activities and supporting records relevant to the claim within our registered RSP scope. How founder remuneration, R&DTI eligibility and related tax obligations are treated remains a matter for the company and its registered tax agent. Start a conversation at /contact-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.
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