The R&D offset is not a fixed percentage. Section 355-100 sets it as the company's own corporate tax rate plus a premium, so whatever decides the tax rate also decides the offset. For most claimants that is the base rate entity test.
The test
Under section 23AA of the Income Tax Rates Act 1986, a company is a base rate entity for a year if:
- no more than 80% of its assessable income is base rate entity passive income; and
- its aggregated turnover, worked out at the end of the year, is less than $50 million.
Passive income under section 23AB includes:
- dividends and other corporate distributions (other than non-portfolio dividends), plus their franking credits;
- interest, royalties and rent;
- gains on qualifying securities and net capital gains; and
- partnership or trust amounts traceable to those.
What it means for the R&D offset
| Company | Tax rate | Refundable offset | Non-refundable tiers |
|---|---|---|---|
| Base rate entity | 25% | 43.5% | 33.5% and 41.5% |
| Not a base rate entity | 30% | 48.5% | 38.5% and 46.5% |
The 25% rate has applied from 2021-22, after 27.5% from 2017-18 and 26% in 2020-21.
The higher rate is most common for pre-revenue startups living on interest, and for companies whose income is mostly royalties. The refundable offset page covers the rest of the calculation, and the calculator asks for the tax rate. Treasury's exposure draft of the 2026-27 Budget changes (consultation 10 to 28 September 2026) proposes a 23 point premium for income years starting on or after 1 July 2028, giving 48% at 25% and 53% at 30%, refundable only for younger companies and non-refundable for older ones under $50 million; that is proposed, not law (see higher core offset rates).