Australia’s R&D Tax Incentive: A General Overview for Clinical Trials
- Anthony Jarvis
- Jan 14
- 4 min read
Australia’s Research and Development (R&D) Tax Incentive is one of the most generous programs of its kind globally and plays a significant role in making Australia an attractive destination for clinical research. Administered jointly by AusIndustry (part of the Department of Industry, Science and Resources) and the Australian Taxation Office (ATO), the R&D Tax Incentive Australia provides a tax offset on eligible R&D expenditure. It often delivers substantial cash refunds to companies conducting innovative work, making Australia an attractive destination for clinical research.
The incentive is particularly relevant for pharmaceutical and biotechnology companies running TGA-regulated clinical trials. While the Therapeutic Goods Administration (TGA) oversees the safety and conduct of trials, the R&D Tax Incentive is a separate fiscal measure that significantly reduces the net cost of research for eligible activities.
How the R&D Tax Incentive Works
The program offers a tax offset based on a company’s aggregated annual turnover:
Companies with turnover below A$20 million receive a refundable tax offset of 43.5% (the base corporate tax rate of 25% plus an 18.5% premium). This is paid as cash if the company is in a tax loss position, which is common for R&D-intensive entities.
Companies with turnover of A$20 million or more receive a non-refundable offset, starting at 38.5% and increasing with R&D intensity (the proportion of total expenditure that is R&D).
A A$150 million annual cap applies to claims for larger entities, beyond which the offset reverts to the corporate tax rate.
To qualify, activities must meet the legislative definition of “core” or “supporting” R&D:
Core R&D involves experimental activities conducted to generate new knowledge where the outcome is unknown in advance.
Supporting R&D directly relates to core activities (e.g., data collection or analysis necessary for the experiment).
Who Can Access the R&D Tax Incentive
The incentive is available to incorporated companies conducting eligible R&D in Australia. Foreign companies can access it provided the R&D is conducted in Australia, often through a local subsidiary, contract research organisation (CRO), or collaborative arrangement. Eligibility depends on who incurs the expenditure and effective ownership of the intellectual property (IP) arising from the activities, which is a common focus during audits.
What Types of Clinical Trial Activities Qualify
Clinical trials frequently qualify under the incentive. In 2022, Industry Innovation and Science Australia approved the Industry Research and Development (Clinical Trials) Determination 2022, which came into effect on 1 April 2022. Under this Determination, many clinical trials notified to the TGA under the Clinical Trial Notification (CTN) or Clinical Trial Approval (CTA) schemes are taken to satisfy the core R&D activity test for the purposes of the legislation. This applies particularly to Phase 0–III trials of unapproved therapeutic goods where scientific uncertainty exists.
AusIndustry still requires proper registration of activities and satisfaction of expenditure eligibility rules.
Eligible expenditure typically includes:
Protocol development and statistical design
Investigator and site fees
Patient recruitment and screening costs
Data management and analysis
Manufacture of investigational product for trial use
Project management directly related to the trial
Common Activities That Do Not Qualify
Routine quality assurance, marketing studies, or post-market (Phase IV) trials generally do not qualify unless they involve genuine experimental elements.
Claim Process
Companies must:
Register eligible R&D activities with AusIndustry within 10 months of the end of the income year.
Include the calculated offset in their tax return lodged with the ATO.
Advance and Overseas Findings applications are available for larger or more complex claims, providing early certainty on eligibility.
Timing and Structuring Considerations
The combination of the R&D Tax Incentive with Australia’s efficient clinical trial regulatory environment—characterised by rapid ethics and governance approvals and no requirement for a separate investigational new drug application—creates a compelling value proposition. Sponsors can achieve high-quality data while recovering a significant portion of costs through the tax system.
Early planning is essential. Structuring trials to maximise eligible expenditure, documenting the experimental nature of activities, and maintaining robust records are critical for successful claims. Companies should also consider timing of expenditure to align with financial year boundaries.
Recent Developments
Recent draft legislation released in December 2025 proposes to exclude activities related to gambling and tobacco (including nicotine products) from the R&D Tax Incentive for income years starting on or after 1 July 2025, with consultation open until 30 January 2026. Clinical trials in health and biotechnology remain fully eligible and strongly supported.
Opportuna Legal provides guidance on the intersection of clinical trial regulation and commercial structuring, including advice on optimising arrangements to support R&D Tax Incentive claims.
If you are planning clinical trials in Australia and wish to understand how the R&D Tax Incentive may apply to your study design, contracting structure, and expenditure profile, contact Opportuna Legal for confidential advice.
Anthony Jarvis
Director | Corporate Opportuna Legal
Anthony Jarvis advises international pharmaceutical and biotechnology companies on Australian clinical trial regulation, Clinical Trial Research Agreements (CTRAs), indemnity arrangements, and sponsor compliance under TGA and NHMRC frameworks.
Contact
Telephone: +61 8 6110 3748
Disclaimer: This article provides general information only and does not constitute legal or tax advice. Readers should seek specific professional advice relevant to their circumstances from qualified legal and tax professionals.
Comments