Can You Claim the R&D Tax Incentive Under $20,000?

The $20,000 minimum R&D expenditure rule

To be entitled to an R&D tax offset for an income year, your total notional R&D deductions normally must be at least $20,000. If your eligible R&D expenditure for the year is below that, you generally cannot claim the offset for that year — unless an exception applies.

For start-ups and SMEs running lean, this threshold is often the barrier: the research is real and may be eligible, but the spend is simply too small to clear $20,000.

The exception: expenditure to a registered RSP

business.gov.au is explicit: the $20,000 threshold does not apply to expenditure you incur to a research service provider to conduct your R&D. In other words, when an RSP does the work, that expenditure can be claimed from the first dollar. The statute reaches the same result by substituting the base the offset is worked out on, rather than by lifting the threshold.

The same exception applies to certain monetary contributions to a Cooperative Research Centre (CRC). Both routes exist precisely so that smaller R&D projects, run through recognised research bodies, can still access the incentive.

Important: this changes how the offset is worked out, not whether your activities qualify. The R&DTI is self-assessed — you must still self-assess that your activities are eligible R&D, and your tax position should be confirmed with a registered tax agent.

A worked example (illustrative only)

Suppose a small company spends $12,000 having a registered RSP carry out eligible experimental development in a field the RSP is registered for. On its own, $12,000 is below the $20,000 threshold, so without the RSP route the company could not claim the offset that year. Because the spend is with a registered, non-associate RSP, that $12,000 forms the substituted base, so it may be claimable — subject to the company self-assessing that the activities are eligible R&D.

This is a simplified illustration, not a calculation of your benefit. Actual offset rates, eligibility and amounts depend on your circumstances and should be confirmed with a registered tax agent.

The conditions you have to meet

• The RSP is registered for the relevant research field. The work must fall within a field for which the provider is on the public RSP register.
• The RSP is not your associate. Spend with an associated entity does not enter the below-threshold base.
• The activities are eligible R&D. You self-assess your activities against the R&DTI definition of core and supporting R&D activities.

The proposed 2028 change ($20,000 → $50,000)

The Government has announced (in the 2026-27 Budget) changes starting from 1 July 2028, described as supporting quality outcomes for R&D projects under $50,000 by requiring businesses to work with recognised research organisations. The announcement does not define that term, and it does not use the words “research service provider”.

This is announced, not yet law — the current $20,000 rule applies until then, and what is described on this page is the current mechanism. Read our explainer on the proposed $50,000 threshold reform.

How to claim R&D under $20,000 — step by step

1. Self-assess your activities. Confirm your activities meet the R&DTI definition of eligible R&D.
2. Engage a registered RSP in the right field. Have the RSP conduct the R&D so the expenditure qualifies for the substituted below-threshold base — see our R&D services.
3. Register and claim. Register your R&D activities with AusIndustry within 10 months of your income year end, then claim the offset in your company tax return (RSP expenditure is reported at its own dedicated label). A registered tax agent prepares and lodges the claim.

Frequently asked questions