For many innovative businesses, the R&D Tax Incentive (RDTI) has long been a vital source of cashflow. But with the release of the new R&D application form in August – and growing scrutiny from regulators – claiming those benefits has become tougher than ever.
Audits are up. Documentation demands are higher. And for some companies, millions of dollars in tax offsets are being held up for years, creating serious financial strain.
Since the 2020–21 Budget reforms and the COVID-19 Recovery Bill, the RDTI landscape has shifted dramatically, with new anti-avoidance rules, tighter transparency requirements and an increase in taxpayer alerts. More businesses are now turning to expert advisors to prepare robust claims, respond to audits and defend their innovation work under review by the Department of Industry, Science and Resources (DISR) or the Australian Taxation Office (ATO).
How to stay ahead
Documentation matters. Keep detailed records of your experiments, challenges, employee timesheets and project outcomes. Missing or incomplete evidence is one of the most common (and costly) reasons claims are rejected.
Detail counts in audits. Regulators want to see how you tackled the unknown – not just what you built. Clear, technical explanations of the uncertainties, hypotheses and experiments are essential to proving eligibility.
Expert guidance makes the difference. Software development claims in particular are under the microscope. Experienced advisors can help frame your activities correctly and align your documentation with the legislation.
Client story: Protecting a $4m R&D tax offset under audit
They thought their R&D claim was safe – until the audit letter arrived.
An Australian fintech company we worked with had self-prepared R&D claims for several years. But when DISR questioned $4 million in tax offsets received over several years, everything changed. The regulator challenged whether the outcomes of the R&D activities were truly “unknown” at the outset – a core test under RDTI legislation.
When DISR escalated the case and issued a notice to withdraw the activities and amend the tax return, $9 million of R&D expenditure was suddenly in jeopardy. Repaying $4 million in tax offsets would have been a major operational setback.
Our approach
From the outset, it was clear the problem wasn’t the R&D work itself – it was how it had been described.
Rather than withdrawing, we proposed a reframed claim supported by detailed evidence and a strong technical narrative. Working closely with the client’s software engineers and finance team, we:
- Held 11 technical workshops to capture and document the innovation process
- Compiled 175+ supporting documents, linking every piece of evidence to RDTI criteria
- Rebuilt the claim narrative to highlight genuine experimentation and technical unknowns
- Engaged collaboratively with DISR, removing non-qualifying activities and reinforcing our position with clarity and confidence
The outcome
Twelve months later, DISR confirmed the reframed R&D claim as eligible, resulting in:
- $4 million in tax offsets retained – protecting financial stability
- Stronger documentation processes – ensuring future compliance
- Renewed confidence – enabling the business to focus on innovation, not audit stress
The takeaway
The RDTI remains one of the most generous innovation programs in the world, but success now depends on rigorous documentation and strategic guidance.
If your R&D claim is under review, or if you simply want to strengthen your position for the future, our R&D specialists can help you protect your entitlements and navigate the process with confidence.
