The R&D Tax Incentive is one of the most valuable funding tools available to Australian businesses, but it’s also one of the most closely scrutinised.
Each year, we see founders and CFOs unknowingly make simple errors that either:
- Reduce their claim value 💸
- Trigger AusIndustry or ATO reviews 😬
- Or worse — lead to repayment and penalties
In this post, we break down the 3 most common mistakes made in R&D claims — and how to avoid them so you can protect your offset and be prepared if your claim is reviewed
🚨 Mistake #1: Claiming Activities That Aren’t Really R&D
The biggest risk in any claim? Misinterpreting eligibility.
Not everything that’s innovative is eligible under the R&D Tax Incentive. The legislation is clear: to qualify, your activity must:
- Address technical uncertainty
- Be based on a systematic experimental process
- Generate new knowledge (not just business improvement)
🔍 Examples of activities that usually don’t qualify as core activities:
- Routine testing, QA, or bug fixing
- Customising off-the-shelf software
- Market research or UX refinement
- Business model innovation (non-technical)
✅ Avoid it:
Document the technical unknown, hypothesis, and testing phases of your R&D process. Ensure your claim clearly separates eligible and ineligible work.
📉 Mistake #2: Poor or Incomplete Record-Keeping
The ATO doesn’t just want to see that you did R&D — they want proof. That includes:
- Technical logs
- Meeting notes
- Time tracking
- Prototypes, test results, and iteration history
Many businesses do the work but fail to keep detailed records. When the ATO reviews a claim, lack of documentation is one of the most common reasons for rejection.
✅ Avoid it:
Build a “real-time evidence habit.” Use tools like Jira, Notion, or Confluence to capture technical notes. Have engineers and developers log time and outcomes weekly. Don’t leave it until tax time.
🧾 Mistake #3: Claiming Costs That Aren’t Eligible
Another common error is bundling in non-R&D costs — especially when finance and technical teams aren’t aligned.
🔍 Examples of non-claimable expenses:
- Marketing and sales salaries
- Founder salaries not directly involved in R&D
- Hosting costs for finished products
- Admin or HR overheads
- Overseas contractor work (unless very specific rules apply)
✅ Avoid it:
Work with both your finance and technical leads to tag costs clearly. Use project codes or time tracking tools to link work with eligible R&D activities.
🛡️ How to Stay Audit-Ready
The key to a strong R&D claim isn’t just technical work — it’s compliance and defensibility. That means:
- Keeping contemporaneous records
- Having clear links between R&D activities, costs, and outcomes
- Preparing for possible ATO or AusIndustry reviews
At Noah Connect, we specialise in building robust, evidence-based R&D claims that maximise value and minimise risk. We’re former lawyers, scientists, engineers, and strategists — so we know how to speak both “tech” and “tax.”
👇 What’s Next?
Next week, we’ll dig into why R&D isn’t just for start-ups and how established businesses can also access the RDTI.
But if you’ve already submitted a claim — or are unsure whether past work was compliant — get in touch. We can review your claim and flag potential issues before they become problems.
📩 Book a free R&D claim health check with us today.
