If you’ve claimed the R&D Tax Incentive before, or you’re about to for the first time, there’s something worth knowing now rather than in ten months’ time. The ATO and AusIndustry have been ramping up compliance reviews, and the businesses getting flagged aren’t the ones doing dodgy work. They’re the ones who did legitimate R&D but can’t prove it properly.
That’s a fixable problem. But only if you fix it before you lodge, not after someone comes asking.
Why Scrutiny Has Gone Up
Australia’s R&D Tax Incentive is a big program. In the most recent ATO transparency data, $16.2 billion in R&D expenditure was claimed across 12,956 companies, with professional, scientific and technical services (which covers most software, SaaS and AI businesses) accounting for the largest single share at $6.19 billion across 5,663 claimants.
When a government incentive gets that large, it gets more attention. Both the ATO and AusIndustry have said plainly that they’re focused on claim quality and documentation, not just whether the activity sounds R&D-ish. Software development, AI projects, fintech and engineering work are named as areas of particular focus, simply because that’s where most of the claim volume sits.
None of this means the program is under threat, or that claiming is riskier than it used to be. It means the bar for evidence has gone up, and founders who treat documentation as a September afterthought are the ones who end up with a stressful phone call.
Compliance Review vs Audit: They’re Not the Same Thing
A compliance review is AusIndustry or the ATO asking you to substantiate parts of a claim you’ve already lodged. It’s more common than a full audit and usually narrower in scope. They might ask for evidence on one or two activities, not your whole claim.
An audit is more serious and less common. Reviews can happen well after you’ve lodged, which is exactly why “I’ll remember what we did” isn’t a strategy. You need records that were created at the time, not reconstructed six months later from memory and Slack scroll-back.
The Records That Actually Hold Up
Contemporaneous beats reconstructed, every time.
This is the single biggest thing founders get wrong. A well-written summary produced at claim time, after the financial year has closed, is worth far less than messy real-time evidence from when the work actually happened. AusIndustry and the ATO both say the same thing: they want to see the story unfold, not a tidy narrative written after the fact.
The good news is you’re probably already creating most of this evidence without trying. It just needs to be kept, not deleted.
What actually counts:
- GitHub commits and pull requests that show iteration, not just a finished feature
- Design docs or Notion pages that show what you expected to happen and what actually happened
- Emails or Slack threads discussing a technical problem you weren’t sure you could solve
- Meeting notes from technical discussions, especially ones where an approach got scrapped
- Timesheets or rough time allocation, even informal ones
- Test results, including the failed attempts, not just the version that shipped
Failed attempts are gold. If your evidence only shows things that worked first go, it doesn’t look like R&D. It looks like a build. Technical uncertainty means you tried something and it might not have worked, and the record should show that honestly.
Core vs supporting activities need different evidence.
Core R&D activities are the actual experiments, the work with real technical uncertainty. Supporting activities are only eligible if you can show they were done for the dominant purpose of supporting that core work. This is where AusIndustry pushes back most, because it’s easy to lump ordinary business-as-usual work in under “supporting” without a clear link back to the core activity. If you can’t draw a straight line from a supporting activity to a specific core activity, it’s a weak claim.
Overseas spend needs more, not less.
If any of your development work happens offshore, expect extra scrutiny. Overseas costs generally don’t qualify for the incentive at all, but the mistake we see most is founders assuming that disqualifies their whole claim. It usually doesn’t. Australian spend around that work, founder time, local contractors, Australian-based testing, can still be eligible. Just be ready to show clearly what was done where, and by whom.
What If AusIndustry Actually Contacts You?
Most founders imagine a compliance review as something dramatic. In practice it’s usually a letter or a call asking you to provide evidence for specific activities within a set timeframe, often a few weeks.
The businesses that handle this well are the ones who can go straight to a folder and pull out commits, design docs and meeting notes without scrambling. The businesses that struggle are the ones trying to reconstruct what happened eighteen months ago from a founder’s memory.
If you get a request like this, don’t panic and don’t go quiet. Respond within the timeframe, be straightforward about what the activity involved, and if anything genuinely wasn’t eligible, say so rather than trying to stretch the story. Reviewers respond far better to a claim that’s honestly scoped than one that oversells every line item.
If your claim was prepared properly in the first place, a review is a paperwork exercise, not a threat to your refund.
Documentation Doesn’t Mean Bureaucracy
We know what a lot of founders picture when they hear “keep better records”: spreadsheets, timesheets, another admin system nobody has time for. That’s not what this is.
The evidence that actually holds up is almost always stuff you’re creating anyway. Commit messages. Slack threads where someone says “not sure this approach will work.” A quick Notion note after a technical meeting. The only change most businesses need to make is not deleting it, and occasionally tagging it so it’s easy to find again later.
This matters more the smaller your team is. A five-person startup doesn’t need a compliance department. It needs one person with a habit of jotting down “here’s what we tried and here’s what happened” whenever the team hits a genuine unknown.
Why Software and AI Founders Specifically Should Care
If you’re building software, and especially if there’s any machine learning in the mix, you’re in the highest-scrutiny category right now. Not because software doesn’t qualify (it absolutely does, when the uncertainty is real), but because it’s the biggest category by dollar volume and the easiest one to get wrong.
The distinction regulators keep coming back to: routine coding, standard integrations, and “first time we’ve used this particular library” implementations are not R&D. Training a novel model on a new dataset, building a genuinely uncertain algorithm, or solving a technical problem nobody in your team knew the answer to when you started, that’s R&D. The work itself often looks similar from the outside. The documentation is what tells them apart.
Current Rules vs What’s Coming
To be clear about where things stand today: the R&D Tax Incentive framework hasn’t changed for this financial year. Companies under $20 million turnover can still access a refundable offset of up to 43.5%, and the minimum eligible spend is still $20,000. Registration with AusIndustry is still due 10 months after your income year ends, which for most companies means 30 April.
The 2026-27 Federal Budget did announce a set of proposed changes, but they’re not law yet, and they wouldn’t start until 1 July 2028. Worth knowing about for planning purposes: the refundable turnover threshold is proposed to rise to $50 million, the minimum spend to $50,000, core offset rates would increase by 4.5 percentage points, supporting activities would be removed from eligibility altogether, and refundability would be limited to companies within their first 10 years of operation. None of that applies to a claim you’re lodging this year or next. Don’t let a headline about 2028 change what you do for this year’s claim.
A Simple Habit That Protects Your Claim
You don’t need a formal project management system to be audit-ready. You need a habit.
Every time your team hits a point where you genuinely don’t know if something will work, write one sentence about it somewhere that has a timestamp. A Slack message, a Notion entry, a commit message. That’s it. Do that consistently and by the time claim season comes around, you’ll have a real trail instead of a blank page and a good memory.
If you’re not sure whether what you’re keeping is enough, that’s a fair question to bring to whoever prepares your claim, and it’s a much better conversation to have in month three of the financial year than in month eleven.
Get It Right the First Time
This is exactly why Granton only takes on claims we’re confident in, and why we build every claim as though it might be reviewed, because it might be. We’ve lodged 55+ claims with a 100% success rate and zero audits, and that track record comes from doing the documentation work properly the first time, not from luck.
If you want a straight answer on whether your R&D work and your current record-keeping would hold up, book a quick eligibility conversation at granton.io/meet. It takes about 15 minutes, there’s no cost to find out, and you only ever pay us if your claim goes through.
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!