Get Ready for Your 2025 R&D Tax Claim: The Stewart & Smith Advisory Checklist

By Mark Churchmichael – Head of Tax and Compliance

The Research & Development Tax Incentive (RDTI) is designed to reward Australian businesses that innovate. It’s a vital source of cash flow for many, fuelling further investment in groundbreaking projects. However, as we approach the 2025 financial year-end, it’s crucial to understand that both the ATO and AusIndustry are ramping up their compliance efforts.

At Stewart & Smith Advisory, we don’t just process your claim; we partner with you to ensure your Research and Development (R&D) activities are meticulously documented, rigorously eligible, and strategically aligned to maximise your return while minimising risk.

Why Start Preparing for Your 2025 R&D Claim NOW?

The RDTI is a self-assessment program. This means the onus is entirely on you to prove your eligibility and substantiate your expenditure. Waiting until the last minute (the 30 April 2026 deadline for 30 June 2025 year-ends) can lead to rushed claims, inadequate documentation, and a higher risk of review or rejection.

Proactive preparation starts now. Here’s our comprehensive checklist to get you R&D claim-ready for the 2025 financial year:

1. Reconfirm Eligibility: Is Your Activity Truly R&D?

The definition of eligible R&D activities is strict, and a common pitfall is claiming routine business activities. For your 2025 claim, remember:

Core R&D Activities: These are experimental activities whose outcome cannot be known or determined in advance based on current knowledge or experience. They must follow a systematic progression of work (hypothesis, experiment, observation, evaluation, logical conclusions) and aim to generate new knowledge (new products, processes, services, materials, or devices).
Supporting R&D Activities: These directly support your core R&D activities. They must be undertaken for the dominant purpose of supporting your core R&D.

Stewart & Smith Insight: Don’t confuse innovation with R&D. While innovation is broad, R&D for tax purposes requires a specific technical uncertainty and systematic experimentation. We can help you critically assess your projects against these criteria to identify genuine R&D.

Exclusions to be Aware Of: The government continues to refine the scheme. From 1 July 2025, R&D activities related to gambling and tobacco will generally no longer qualify, with limited exceptions for harm minimisation. If you operate in these sectors, or in software development where eligibility can be tricky (e.g., bug fixes vs. new algorithm development), it’s vital to seek expert advice early.

2. Master the Art of Contemporaneous Documentation (It’s Non-Negotiable!)

This is arguably the most critical aspect of a successful R&D claim and where many businesses fall short. “Contemporaneous” means creating records as the activities are happening, not retrospectively.

For your 2025 claim, ensure you have:

Technical Evidence:

Project Plans:Clearly outlining the technical problem, the hypothesis, the experimental design, and the expected new knowledge.
Experiment Logs/Journals:Detailed records of tests, trials, observations, and evaluations. What was tried, what was the outcome, what was learned? Why did it fail? What was the next step?
Meeting Minutes:Records of discussions about technical challenges, design reviews, and experimental progress.
Design Specifications & Blueprints:Iterations and changes throughout the development process.
Test Reports & Results:Analysis of experimental outcomes.
Photos/Videos:Visual evidence of prototypes, experiments, or new processes.
Literature Reviews/Patent Searches:Demonstrating that the outcome wasn’t already known or publicly available.
Software Development Specifics: Version control logs, code repositories with detailed comments, developer notes outlining technical challenges and solutions (e.g., for new algorithms, AI models, or complex integrations).

Financial Evidence:

Timesheets/Activity Records: Crucially, for all personnel involved in R&D, demonstrating the specific hours/days spent on eligible activities. This applies to employees and contractors. Generic “R&D” time isn’t sufficient; detail the specific R&D tasks performed.
Invoices & Contracts:Clearly detailing R&D-related expenditure from suppliers and contractors. If an invoice lumps R&D and non-R&D work, get it itemised.
Payroll Records:For employees directly engaged in R&D activities.
Expenditure Allocation Methodologies:How you’ve apportioned costs (e.g., utilities, overheads) to R&D activities.
Associate Payments: The ATO is scrutinising payments to associated entities. Ensure these are legitimate, paid (not just accrued) by year-end, and thoroughly documented with contracts and invoices.

Stewart & Smith Advisory Differentiator: We can conduct R&D documentation workshops with your team to embed best practices. We help you establish systems for capturing the right technical and financial evidence in real-time, making your year-end claim process seamless and audit ready.

3. Review Associated Expenditure & Overseas Activities

Overseas R&D: Generally, R&D must be conducted in Australia to be eligible. If you have essential overseas R&D activities (e.g., access to unique facilities or expertise not available in Australia), you must apply for an Advance/Overseas Finding from AusIndustry before 30 June 2025 for your 2025 claim. This is a strict requirement.
“On-Own-Behalf” Rule: Ensure that your company is bearing the financial risk and undertaking the R&D on its own behalf. This is particularly relevant when engaging contractors or collaborating with other entities.

4. Leverage Expert Assistance: The Stewart & Smith Advantage

The R&D Tax Incentive is complex. Changes in interpretation, increased compliance, and specific industry scrutiny (like software) mean that expert guidance is more vital than ever.

Stewart & Smith Advisory can provide invaluable support by:

Identifying Eligible Activities: Our technical specialists work with your team to pinpoint genuine R&D, translating your innovative work into the language of the RDTI.
Optimising Your Claim: We ensure all eligible expenditure is captured and correctly apportioned, maximising your tax offset.
Developing Robust Documentation Systems: We help you implement internal processes that generate the required contemporaneous evidence, protecting you in case of an audit.
Navigating Compliance: We stay abreast of the latest ATO and AusIndustry guidance, helping you avoid common pitfalls and respond effectively to any reviews.
Strategic Planning: We integrate your R&D strategy with your overall business and financial planning, ensuring this valuable incentive supports your long-term growth.

5. Lodging your R & D claim with the ATO

Lodging your claim: Once your R& D submission has been lodged with AusIndustry and an approval number obtained, it must then be included in your Annual Company Income tax return.
Detail and complexity: The R & D Tax incentive schedule is complex and interplays with your company financial data, profit and turnover figures. Errors or misstatements may result in delays in your refund, ATO reviews or even ATO Audits.

Stewart & Smith Advisory Differentiator: With over 25 years in successfully helping clients prepare, process and claim R & D refunds and incentives, we have an enviable track record maximising R & D claims for our clients.

Don’t leave your 2025 R&D Tax Incentive claim to chance. The window for proactive preparation is now. By getting your ducks in a row today, you can confidently claim the benefits you’re entitled to, free up cash flow, and continue to invest in the innovation that drives your business forward.

Contact Stewart & Smith Advisory today at info@stewartsmithadvisory.com for a complimentary discussion on your R&D activities and how we can help you prepare for a seamless and successful 2025 R&D Tax Incentive claim as well as lodging the claim through your company Income tax return.