Mastering the R&D Tax Incentive: top mistakes to avoid with your application

Navigating the Research and Development (R&D) Tax Incentive doesn’t have to be a headache if you know what pitfalls to avoid. We spoke with Bruce Murray, R&D Consultant at FundFindrs, who shares a list of the most common R&DTI application mistakes and, more importantly, how to prevent them.

 

The R&DTI is an invaluable funding opportunity, supporting business innovation and growth. Yet many companies struggle with eligibility criteria, fail to maintain proper records, or underestimate the importance of early submission — all of which can lead to application delays or rejections.

 

With extensive experience in R&D compliance and successful claims, Bruce gives us a rundown of common application mistakes and highlights what businesses can do to increase their chances of a smooth, stress-free successful application.

 

1. What are some common mistakes companies make when preparing their R&D Tax Incentive application?
2. Why are some R&D Tax Incentive applications rejected?
3. What might first-time R&DTI applicants overlook when determining eligible projects?
4. What are the most common mistakes companies make in documenting their R&D activities? What specific aspects do they frequently neglect?
5. How does the submission deadline for the R&DTI impact businesses?

 

1. What are some common mistakes companies make when preparing their R&D Tax Incentive application?

One of the most common mistakes companies make is failing to keep adequate records of their R&D activities. Many businesses do not document their R&D activities thoroughly, leading to gaps in the evidence required to document and substantiate their claims.

 

Another key issue is the misunderstanding of what constitutes eligible R&D under AusIndustry’s definition. What a company considers innovative or experimental may not necessarily align with the program’s criteria. This is where an R&D Consultant plays a vital role, helping businesses interpret and meet the eligibility requirements correctly.

 

Companies also sometimes lack scientific metrics to support their claims. Without proper quantifiable data documentation of methodologies, experiments and outcomes, an application may fall short of addressing the necessary criteria.

 

 

2. Why are some R&D Tax Incentive applications rejected?

The primary reason applications are rejected is a lack of evidence demonstrating eligible R&D activities. Each application is assessed on its own merits. If it fails to meet legislative criteria, it will not be approved.

 

To ensure success, companies must provide clear experimental evidence, including quantifiable data and methodologies. This involves tracking changes and improvements throughout the R&D process, showing what the data indicated before the project began and how it evolved because of the R&D efforts.

 

Ultimately, applications need to demonstrate a structured, scientific methodology to problem solving and innovation. Without this, even genuinely innovative work may not qualify for the incentive.

 

3. What might first-time R&DTI applicants overlook when determining eligible projects?

It is important that any business considering applying for the R&DTI understands the definition of eligible R&D activities. This definition comes from the legislation, rather than being based on what a company may consider R&D activities.

 

Once a company understands the definition of eligible R&D activities, it is important to isolate those R&D activities from general project activities. This is something businesses may overlook and therefore subsequently find challenging. Part of what we do is assist our clients with the clarification and direction to ensure eligible activities are not missed.

 

4. What are the most common mistakes companies make in documenting their R&D activities? What specific aspects do they frequently neglect?

We have found that some companies have done the experimental research required, and it would meet the criteria of what is eligible. However, they are let down by record keeping. It is very important to keep track of research evidence in each aspect of the research.

 

An example of this would be engaging an external consultant. Where an external person is engaged to deliver an outcome requiring research, the company engaging the consultant should include the experimental and research evidence in the plans and working documents of the project. These records should be maintained to demonstrate the research involved, not simply the engagement of another party to carry out the work.

 

Without this record of work, and detailed account of the activities, an application will likely be rejected.

 

 

 

5. How does the submission deadline for the R&DTI impact businesses?

We can all identify with the pressure an approaching deadline brings, and we always recommend applying for the R&D Tax Incentive sooner rather than later. One common mistake businesses make is underestimating the time required to prepare a strong application, often assuming they have plenty of time within the 10-month window provided by AusIndustry — from 1 July following FYE to the final submission deadline of 30 April. However, many companies face competing priorities, such as business development, compliance, finance, and marketing, which can lead to last-minute submissions.

 

Delaying an R&DTI application can result in several negative consequences, including a delayed rebate due to longer processing times, increased administrative workload when processing tax adjustments after lodging the Company Tax Return (CTR), and reduced cash flow, which can impact overall business operations. To avoid these pitfalls, businesses should aim to submit their applications as early as possible following the end of the financial year.

 

---

 

FundFindrs is here to help. Get in touch if you want to chat about how our team can collaborate with your business and guide your R&DTI application. Additionally, we can support identifying other funding opportunities through grants. Book a FREE chat with one of our specialist consultants now.