Who reviews an R&D Tax Incentive claim?
Two agencies, looking at different things. The Department of Industry, Science and Resources (DISR, acting for Industry Innovation and Science Australia) handles registration and the eligibility of R&D activities. The ATO administers the tax offset, including whether the correct expenditure was claimed on eligible activities. The two agencies run complementary risk assessment and compliance work. (ATO — Helping you get R&D claims right)
| DISR (AusIndustry) | ATO | |
|---|---|---|
| Looks at | Whether registered activities are core or supporting R&D activities | Whether the expenditure and offset claimed are correct |
| What it is called | An examination, which ends in a finding | A review or audit of the claim |
| Legal basis | Industry Research and Development Act 1986 | Tax law, including Division 355 of the Income Tax Assessment Act 1997 |
| Can involve the other agency | Yes, either agency may ask the other to conduct a review | Yes |
The program is self-assessed. The ATO notes that receiving a registration number from DISR does not mean the activities meet the eligibility requirements: it means the application was received and is complete, and the entity can still be subject to compliance action by either agency. (ATO — R&D tax incentive transparency reports; business.gov.au — Assuring integrity in the R&D Tax Incentive)
What triggers an R&D tax review?
Neither agency publishes a checklist of triggers, but both describe a risk-based approach. DISR says it examines activities only where it is concerned there is a high eligibility risk, and that it has no targets or quotas for examining registrations. The ATO says it focuses on larger businesses, high-expenditure claims and claims flagged by its risk-based approaches, including possible fraud.
Those statements come from business.gov.au — Assuring integrity in the R&D Tax Incentive and the ATO's R&DTI compliance approach (published 23 September 2026). The ATO also names the areas it is concerned about. Its published list includes:
- ordinary business activities claimed as R&D
- the apportionment of overheads to R&D
- R&D activities delivered by associated entities
- expenditure that is not at risk
- R&D conducted overseas by related foreign entities
- record keeping.
(ATO — Helping you get R&D claims right)
Two Taxpayer Alerts sit behind some of those concerns: TA 2023/4 on R&D activities delivered by associated entities, and TA 2023/5 on R&D conducted overseas for foreign related entities. The ATO also notes that, from 1 July 2021, R&D tax offsets count as a tax benefit under the general anti-avoidance rule in Part IVA. For large corporates, R&D claims are also covered by the ATO's Top 100, Top 500 and Top 1,000 assurance programs. (ATO — R&DTI compliance approach)
What happens in a DISR examination?
DISR examines your application and records to decide whether the activities are eligible, and the result is a legally binding finding. It can examine before or after registration, and it can look at current and previous income years. You receive a notice and a Statement of Issues, then have 30 days to provide evidence. Extensions are possible.
The steps DISR describes (business.gov.au — Decisions we make about R&D Tax Incentive applications):
- It notifies you and explains the process.
- It gives you a Statement of Issues setting out its concerns.
- You have 30 days to provide evidence and further information.
- It notifies you of the outcome, which is a finding.
If you need more time, a further 14 days may be allowed if you ask before the 30-day deadline, explain why and confirm you can respond within that time. Longer extensions are possible only in limited circumstances, and the total of all extensions is capped at 92 days unless you are waiting on a separate pending decision. (business.gov.au — Assuring integrity in the R&D Tax Incentive)
| Examination timing | If activities are found ineligible |
|---|---|
| Before registration | DISR refuses to register them, so no offset can be claimed on them |
| After registration | DISR notifies you and the Commissioner of Taxation; the finding can cover current and previous income years |
What happens in an ATO review?
The ATO reviews the expenditure side of the claim. If it reviews your claim, it will ask for records showing that the R&D expenditure was only for eligible R&D activities. DISR and the ATO share some information, and either agency may ask the other to conduct a review. (business.gov.au — Assuring integrity in the R&D Tax Incentive)
The ATO states that business records must be sufficient to verify three things:
- the amount of expenditure incurred on R&D activities
- the nature of the R&D activities
- the relationship between the expenditure and the activities.
It adds that documents created after the fact will generally not be adequate on their own without some contemporaneous records, and that reasonable methods must be used to separate R&D expenditure from other spending, with the apportionment methodology and its rationale documented. (ATO — Helping you get R&D claims right)
What records do reviewers ask for?
Records that show what was done, how, when, by whom, and what it cost, linked activity by activity. DISR's record-keeping guidance lists background research showing the outcome could not be known in advance, the steps and methods used, dates, the people involved, the resources used, and expenditure tied to each activity, including any apportionment method.
DISR's guidance (business.gov.au — Record keeping for the R&D Tax Incentive) gives examples:
| To show | Examples DISR gives |
|---|---|
| The outcome could not be known in advance | Expert correspondence or reports; background research showing gaps in current knowledge |
| A systematic progression of work | Experimental plans; records of trial runs; test reports with results and evaluation |
| The purpose was generating new knowledge | Meeting records; emails; project plans; expenditure approval requests |
| A supporting activity relates to a core activity | Meeting records; emails; experimental or project plans |
R&D records must be kept for 5 years after the expenditure is claimed (business.gov.au — Record keeping for the R&D Tax Incentive). DISR also warns that if you cannot provide records about your activities, it is likely to decide you did not conduct, or plan to conduct, eligible R&D activities. (business.gov.au — Assuring integrity in the R&D Tax Incentive)
Records made as the work happens matter most. For what that means in practice, see what "contemporaneous documentation" means for the R&D Tax Incentive. For how supporting activities need to be linked to a core activity, see documenting core and supporting R&D activities.
How far back can the ATO and DISR look?
For companies with R&D claims, the ATO's amendment period is generally 4 years. A 2-year period may apply to assessments for the 2021–22 or earlier income years. DISR can examine current and previous income years. Special rules let the ATO amend outside the standard period to give effect to certain DISR findings and review decisions.
| Timeframe | Period | Source |
|---|---|---|
| Registering activities with DISR | 10 months after the end of the income year | business.gov.au |
| Responding to a DISR examination | 30 days, extensions capped at 92 days in total | business.gov.au |
| Asking DISR for an internal review of a finding | 28 days after notification | business.gov.au |
| ATO amendment period for companies with R&D claims | Generally 4 years (2 years may apply to 2021–22 or earlier) | ATO |
| Objecting to an assessment that includes an R&D offset | 4 years after the return is lodged | ATO |
| Keeping R&D records | 5 years after the expenditure is claimed | business.gov.au |
The ATO's special rules cover DISR giving the Commissioner a finding about registration, activities outside Australia or core technology, and internal review, Administrative Review Tribunal or court decisions on certain matters. (ATO — Correcting mistakes and disputing decisions)
What happens after an adverse finding?
The ATO is bound by DISR's finding and must amend to give effect to it. If a finding removes some or all of an offset already claimed, you should self-amend. If you do not, the ATO will start an audit, but it waits 28 days first to allow a self-amendment. The finding takes effect immediately, even while an internal review is under way.
That process is set out on the ATO's Correcting mistakes and disputing decisions page. DISR also notes that where a finding means an offset was claimed on ineligible activities, penalties and interest charges may apply (business.gov.au — Decisions we make about R&D Tax Incentive applications). The costs that can follow an amendment are:
- Shortfall Interest Charge and General Interest Charge on the resulting tax shortfall. Neither is tax-deductible where it is incurred on or after 1 July 2025 (ATO — Denying deductions for ATO interest charges). See GIC and SIC are no longer tax-deductible.
- Shortfall penalties for a false or misleading statement. The base penalty is 25% of the shortfall for failure to take reasonable care, 50% for recklessness and 75% for intentional disregard. It is generally reduced if you tell the ATO about the error voluntarily, by 20%, by 80% or, in some cases, to nil. Generally, no penalty applies under this provision where you or your agent (if relevant) took reasonable care. (ATO — Penalties for making false or misleading statements)
If you have concerns about repaying an R&D debt, the ATO says it will consider assistance after you have requested a self-amendment.
Can you challenge a finding or an ATO decision?
Yes, through separate review paths for each agency. For a DISR finding, you can request an internal review within 28 days, then apply to the Administrative Review Tribunal, with appeals to the Federal Court on errors of law. For an ATO assessment, you lodge an objection in writing, then can seek external review at the Tribunal or Federal Court.
- DISR: the internal review considers the original evidence and any new information, and confirms, varies or sets aside the decision. Tribunal and Federal Court decisions on the R&DTI are published on AustLII. (business.gov.au — Decisions we make about R&D Tax Incentive applications)
- ATO: there is no fee to object. For an amended assessment, the objection period is the later of 60 days from the amended assessment or 4 years from the original assessment, unless a 2-year period applies. (ATO — Correcting mistakes and disputing decisions)
What are advance and overseas findings?
They are binding DISR decisions you can apply for before claiming. An advance finding is optional and covers the eligibility of Australian activities for up to 3 income years. An overseas finding is mandatory if you want to claim expenditure on R&D conducted outside Australia. Neither covers expenditure, and applications are due before the end of the relevant income year.
| Advance finding | Overseas finding | |
|---|---|---|
| Required? | No, optional | Yes, to claim overseas R&D expenditure |
| Covers | Eligibility of Australian activities | Whether overseas activities meet 4 conditions |
| Covers expenditure? | No | No, expenditure is still shown to the ATO at claim time |
| How long it lasts | Up to 3 years, from the income year you apply | For the duration of the overseas activities it covers |
| Application deadline | Before the end of the income year the activities are conducted or planned; no late applications | Same; no late applications |
| Average processing time | 90 days | 90 days |
| Stops being valid if | The activity materially changes from the certificate | The activity materially changes from the certificate |
DISR sends a copy of both kinds of finding to the ATO. A positive finding is not a registration: you still register the activities and quote the certificate number when you register and when you claim. (business.gov.au — Apply for an advance finding; business.gov.au — Apply for an overseas finding)
An advance finding answers the eligibility question about activities in advance. The ATO can still review the expenditure claimed on them.
What does the published claimant data show about reviews?
The ATO publishes each claimant's name, ABN or ACN and total R&D expenditure, two years after the income year. It says publication encourages voluntary compliance. The data does not show whether a claim was reviewed, and amendments the Commissioner makes after a review or audit are not published. For what is in the dataset and where to find it, see what the ATO publishes about R&D claimants.
Where to go from here
For the underlying rules, including core versus supporting activities and the test for new knowledge, see the plain-English guide to the R&D Tax Incentive rules. For a specific question about how the rules apply, you can ask a question. This article is general information, not tax advice. An R&D tax adviser or registered tax agent can advise on your own circumstances.
Dossio is infrastructure for capturing R&D evidence in structured, dated form as the work happens, with R&D tax experts providing oversight. It does not stop a claim being selected for review, and it does not decide eligibility or the outcome of a review.
Sources
- ATO — Helping you get R&D claims right
- ATO — Correcting mistakes and disputing decisions
- ATO — R&DTI compliance approach (transparency report 2023–24)
- ATO — R&D tax incentive transparency reports
- ATO — Penalties for making false or misleading statements
- ATO — TA 2023/4 and TA 2023/5
- business.gov.au — Assuring integrity in the R&D Tax Incentive
- business.gov.au — Decisions we make about R&D Tax Incentive applications
- business.gov.au — Record keeping for the R&D Tax Incentive
- business.gov.au — Request an extension or variation
- business.gov.au — Apply for an advance finding and Apply for an overseas finding