Australia continues to attract MedTech innovators seeking an efficient pathway for clinical research. Most sponsors who run a clinical trial in Australia assume the spend qualifies for the R&D Tax Incentive simply because it happened on Australian soil.
It doesn’t work that way. Eligibility depends on company structure, on which specific activities were performed, on where the decisions behind those activities were actually made, and on how the trial was set up from day one. Get any of that wrong, and the problem usually doesn’t surface until well after the money that would have qualified has already been spent.
How the R&D Tax Incentive work?
Companies with aggregated global turnover under AUD $20 million can access the R&D Tax Incentive as a refundable cash offset, worth their corporate tax rate plus an 18.5% premium, roughly 43.5% of eligible R&D expenditure. The ATO pays it out as cash even if the company is pre-revenue or in a loss position.
A company spending AUD $2 million on eligible Australian engineering, prototyping, and clinical trial work can see close to AUD $870,000 come back, real runway for a Series B device company watching its cash position.
Cross AUD $20 million in aggregated turnover and the benefit shifts to a non-refundable offset, worth modeling well before you get there. There’s also a floor: total notional deductions generally need to reach AUD $20,000 before a company can access the offset at all, unless the R&D is contracted to a registered Research Service Provider, which is exempt. The precise figure for any given company depends on its specific circumstances, which is why this belongs in a conversation with a specialist early, rather than an assumption baked into a budget.
Where sponsors get tripped up
Only an incorporated Australian entity can claim the incentive; a foreign corporation without an Australian permanent establishment can’t claim it directly, which is why the simplest path for most overseas sponsors is a wholly owned Australian subsidiary.
The incentive also runs through two separate agencies: AusIndustry, part of the Department of Industry, Science and Resources, handles registration of the R&D activities themselves, while the ATO administers the tax offset once that registration is in place.
The ATO expects to see evidence that the strategic decisions about Australian activities were actually made by people based in Australia, not rubber-stamped locally while the real calls happened elsewhere, and coverage runs activity-by-activity rather than blanket. Only work that meets the program’s R&D criteria counts.
That combination of structure, decision-making location, and activity-level eligibility is what separates a clean claim from a contested one, and it’s far easier to build correctly from the outset than to retrofit once a trial is already running.
Compliance scrutiny is increasing
Sponsors who wait until a trial is underway to evaluate these requirements often find the subsidiary doesn’t exist yet or the documentation trail doesn’t reflect the right decision-making structure, and fixing that mid-program is slow and expensive compared to setting it up correctly the first time.
Both the ATO and AusIndustry have increased compliance reviews and audit activity in recent years. Software and AI-enabled device projects, SaMD, connected diagnostics, embedded firmware, are drawing particular attention, precisely because it’s harder to separate genuine experimental work from routine coding and configuration than it is with a physical prototype. A claim file that would have cleared review a few years ago isn’t guaranteed to clear it today.
Registration itself has a hard deadline, within 10 months of the end of the income year the activity occurred in, typically end of April for a standard financial year. Miss it and that year’s claim is gone.
A 2028 reform to watch
A reform is coming that’s worth tracking, though it isn’t law yet and there’s nothing to act on. The government’s proposed changes, not expected before July 2028, would raise the refundable-offset turnover threshold from AUD $20 million to $50 million and the minimum expenditure threshold from $20,000 to $50,000, limit refundability to a company’s first 10 years of operation, and remove offset eligibility for supporting R&D activities altogether, leaving only core activities covered.
Worth a line in the model for anyone planning a multi-year Australian program, not something to act on until it passes.
Plan the tax conversation like you plan site selection
None of this is a substitute for your own tax advisor, and it shouldn’t be. What we’d say instead is: bring that conversation into trial planning far earlier than most companies do, on the same timeline as site selection, not something finance sorts out after the protocol is locked.
That’s true whether the funding freed up becomes runway for the next study milestone or capital for a broader market access and reimbursement strategy.
Get the sequencing right and the incentive functions as planned capital that extends your runway, rather than a claim you’re scrambling to justify a year later.
Speak with our experts
Considering a clinical program in Australia? Early evaluation of company structure, governance requirements, and trial planning can help determine whether you are positioned to benefit from the R&D Tax Incentive.
Tell us about your project and our Australia team will help you plan the tax conversation alongside your trial strategy. Prefer to reach our Australia team directly? Contact AUSinfo@avaniaclinical.com.
References
R&D Tax Incentive overview — business.gov.au
Check if you are eligible for the R&D Tax Incentive — business.gov.au
Rates of R&D Tax Incentive offset — Australian Taxation Office
R&D Tax Incentive for Foreign Companies — Australian Business Register
Tax Reform: better targeting the Research and Development Tax Incentive — Australian Taxation Office, published 12 May 2026
Research & Development Tax Incentive (RDTI): Navigating Australia’s Evolving Compliance Landscape — Vistra, 28 July 2026
Frequently asked questions
Does clinical trial spend in Australia automatically qualify for the R&D Tax Incentive?
No. Eligibility depends on company structure, the specific activities performed, where the decisions behind those activities were made, and how the trial was set up from the outset.
Do I need an Australian subsidiary to claim the R&D Tax Incentive?
Only an incorporated Australian entity can claim the incentive directly. Most overseas sponsors set up a wholly owned Australian subsidiary to do so.
How much can a company claim under the R&D Tax Incentive?
Companies under AUD $20 million in aggregated turnover can access a refundable offset worth roughly 43.5% of eligible R&D expenditure, though the exact figure depends on individual circumstances and should be confirmed with a tax advisor.
When is R&D Tax Incentive registration due?
Registration is due within 10 months of the end of the income year the activity occurred in, typically the end of April for a standard financial year.
What is changing with the proposed 2028 R&D Tax Incentive reform?
Proposed changes not expected before July 2028 would raise the turnover and expenditure thresholds, limit refundability to a company’s first 10 years of operation, and remove offset eligibility for supporting R&D activities. It is not yet law.