Almost every founder we speak to has some part of their build sitting offshore. A team in Vietnam. Two engineers in Poland. An agency in India that has been with them since the first prototype.
And almost every one of them asks the same question: does any of that count for the R&D Tax Incentive?
The honest answer is that most of it does not, at least not by default. But that is very different from “you cannot claim anything”, which is what a lot of founders assume and why a lot of them never bother applying. We have seen companies with a genuinely offshore-heavy build still walk away with a solid refund, because the Australian portion of their work was worth far more than they realised.
Here is how it actually works, what the exception looks like, and what to do about it before the financial year gets away from you.
The short version
Work physically carried out overseas does not qualify for the R&D Tax Incentive unless you have a positive Overseas Finding from AusIndustry, and you have to apply for that finding before the end of the income year in which the work happens.
Everything you spend in Australia on eligible R&D still counts. Founder time, Australian employees, Australian contractors, and a share of your overheads. For a lot of startups, that Australian slice is bigger than they expect once someone sits down and maps it properly.
Why overseas spend is excluded by default
The R&D Tax Incentive exists to build capability inside Australia. The program is designed to reward experimental work done here, by people here, so the knowledge and the skills stay in the country.
So the test is not who paid for the work or which company employs the developer. The test is where the activity was physically conducted.
That catches a few founders out. If your Australian company employs a full-time engineer who lives in Manila and works from Manila, that work is overseas activity. The employment contract does not change it.
It also catches out the agency arrangement. If you engage an Australian development shop and they quietly subcontract the build to a team in another country, those costs are not eligible either. The invoice is Australian, the work is not. Worth checking your agency agreement if you are not sure where the actual keyboards are.
The exception: an Overseas Finding
There is a legitimate path to claiming overseas R&D expenditure. It is called an Overseas Finding, and it is a formal determination from AusIndustry that specific overseas activities are eligible. A positive finding is binding on the ATO, so once you have it, you have real certainty.
It is not a rubber stamp. Your activities have to meet four conditions.
1. The overseas activity has to be genuine R&D
It has to satisfy the same core or supporting R&D activity tests that any Australian activity would. Technical uncertainty, hypothesis, experiment, conclusion. Routine coding does not become eligible just because it happens abroad.
2. It has to be tied to an Australian core activity
There must be at least one core R&D activity conducted solely in Australia, and you must not be able to complete that Australian activity without the overseas work. The link has to be scientific, not commercial. “We needed more hands” is not a link.
3. The activity genuinely cannot be conducted in Australia
This is the one that stops most applications. Accepted reasons include facilities, expertise or equipment that do not exist here, quarantine restrictions, access to a specific living population, or unique geographical or geological features.
4. Overseas spend must be less than Australian spend
Across the life of the project, the total cost of the overseas activities has to be less than the total cost of the related Australian activities. If your build is 80% offshore, this condition alone will sink the application.
The one thing that is never a reason: cost
Being cheaper overseas is not a valid justification, and AusIndustry says so plainly. “We could hire five developers in Eastern Europe for the price of one in Sydney” is a completely rational business decision and a completely useless argument in an Overseas Finding application.
The deadline nobody tells you about
Here is where it gets painful.
An Advance Overseas Finding must be lodged before the end of the income year in which you conduct or plan to conduct the overseas activity. For a standard 30 June year end, that means 30 June. Not 30 April the following year like your normal registration. Late applications are not accepted and there are no extensions.
So if you are reading this in July 2026 and you were hoping to claim offshore work from the year that just ended, that window has closed.
The good news is that the current financial year has barely started. If offshore R&D is going to be a meaningful part of your build in FY2026-27, you have until 30 June 2027 to get an application in, and you should start well before that because the applications are detailed and AusIndustry asks real questions.
Two deadlines to keep straight:
Advance Overseas Finding for FY2026-27 overseas activities: 30 June 2027.
Standard R&D registration for FY2025-26 activities: 30 April 2027.
What you can still claim when your build is offshore
This is the part founders skip, and it is usually where the money is.
Founder time
If you are an Australian-based founder writing code, designing architecture, running experiments, reviewing pull requests, or making the technical calls, that is Australian R&D activity. Most technical founders are doing far more eligible work than they give themselves credit for, and if you are paying yourself a salary through the company, that salary is claimable expenditure to the extent it relates to R&D.
The founders who tell us “the offshore team does everything” usually turn out to be the ones setting the hypotheses and deciding what gets tested. That is core R&D.
Australian employees and contractors
Any Australian staff involved in the experimental work counts. So does an Australian contractor, provided the work is actually done here. That includes technical people you might not think of as R&D, like a data engineer, a DevOps contractor doing genuinely novel infrastructure work, or a product person running structured experiments.
Overheads and other Australian costs
A reasonable apportionment of rent, utilities, and software and cloud costs used for R&D can be included. AWS bills, testing environments, and specialised tooling all sit here. It needs to be apportioned sensibly and documented, not guessed at.
The threshold that matters
You need at least $20,000 of eligible R&D expenditure to claim at all. That is the current minimum. When founders assume their claim is dead because of offshore developers, they often have $60,000 or $90,000 of Australian spend sitting in plain view.
A quick example of how the numbers land
Say a SaaS company spent $400,000 on development last financial year. $260,000 went to an offshore team, and there is no Overseas Finding in place.
The remaining $140,000 was Australian. A technical founder on a $120,000 salary spending 70% of their time on eligible R&D, one Australian contractor, and apportioned cloud and tooling costs.
That $260,000 is out. The $140,000 is potentially in. At the 43.5% refundable rate for a company under $20 million turnover, that is up to roughly $60,000 back as cash, even if the company made a loss.
The founder who assumes “we are mostly offshore, so there is no point” leaves that on the table.
How to structure things from here
A few practical moves, in order of how much difference they make.
Keep the core experimental work in Australia where you can. Not just for the tax outcome, but because the program is built to reward exactly that, and it makes every future claim cleaner.
Know where your agency’s work is actually performed and get it in writing. If they subcontract offshore, you need to know the split.
Track Australian time properly from the start of the year. You do not need formal timesheets, and most of our clients do not have them. GitHub commits, Notion docs, Slack threads, sprint boards, and calendar entries all work as contemporaneous evidence. Reconstructing it in April is much harder than capturing it as you go.
If you have a genuine case for overseas activity, one where the expertise or the facility truly does not exist in Australia, start the Advance Overseas Finding conversation early in the year, not in June.
The bottom line
Offshore developers do not disqualify you. They reduce the eligible pool, and they mean the Australian portion of your work has to carry the claim. Most of the time it can.
The mistake is not the offshore team. The mistake is deciding you are ineligible without ever having the Australian side of your spend properly mapped by someone who does this every week.
If you are not sure which side of the line your build sits on, have a quick eligibility conversation at granton.io/meet. It takes about fifteen minutes and you will get a straight answer either way. If we do not think you have a strong claim, we will tell you and we will not take you on. Our fee is success-based, so we only earn anything when you do.
Granton has unlocked more than $7.9 million in R&D refunds for over 55 Australian startups, with a 100% success rate and zero audits. Plenty of them had offshore teams.
Are you ready to turn your funding aspirations into reality? At Granton, we specialize in helping individuals and businesses navigate the world of grants, offering expert guidance on grant applications and finding opportunities that best suit their needs. Whether you’re seeking funding for a startup, nonprofit, or a specific project, our team is here to assist you every step of the way. We take the guesswork out of Grant Applications, R&D Tax Incentives, and Accelerator Programs, making the process smoother and increasing your chances of success. Ready to take the next step? Book a free consultation with us today, and let’s explore how we can help you secure the grants you deserve. Visit our website at granton.io to learn more or use our contact form to get in touch. Your grant journey starts here!