# R&D Tax Incentive Research — RateRight Pty Ltd

**Status:** Complete  
**Date:** 17 February 2026  
**Researcher:** Harper (Finance/Legal)

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## Executive Summary

**Verdict:** RateRight has **STRONG eligibility** for the R&D Tax Incentive, but documentation and registration requirements are critical.

**Potential benefit:** 43.5% refundable tax offset on eligible R&D expenditure (for companies <$20M turnover)

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## 1. Entity Eligibility

### RateRight Qualifies:
| Requirement | RateRight Status | ✅/❌ |
|-------------|-----------------|-------|
| Incorporated under Australian law | RateRight Pty Ltd (ACN 676 293 635) | ✅ |
| Not an exempt entity | Standard Pty Ltd, taxable | ✅ |
| Not a trust, individual, or partnership | Corporate structure | ✅ |

**Conclusion:** RateRight is an eligible R&D entity.

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## 2. Activity Eligibility

### Core R&D Activity Requirements (Section 355-25 ITAA 1997)

For an activity to be "core R&D", it must:

1. **Be experimental** — Systematically progress work through hypotheses, experiments, observations, and evaluations
2. **Purpose of generating new knowledge** — New knowledge about materials, products, devices, processes, or services
3. **Outcome cannot be known/determined in advance** — Uncertainty must exist at the outset
4. **Not be excluded activities** — Eg, market research, routine software development

### RateRight's Likely Eligible Activities

| Activity | Eligibility Assessment | Strength |
|----------|----------------------|----------|
| **AI-powered tradie-matching algorithm** | Developing novel ML model to match tradies with jobs based on skills, availability, location — outcome uncertain at outset | **STRONG** |
| **Skills taxonomy/natural language processing** | Building system to parse and categorize tradie skills from unstructured data — new knowledge in construction domain | **STRONG** |
| **Dynamic pricing engine** | Algorithm to determine fair market rates for jobs — experimental approach required | **MODERATE** |
| **Mobile app development** | Standard implementation using known frameworks — likely **NOT eligible** | ❌ |
| **Database/admin systems** | Supporting infrastructure — eligible as **supporting R&D** if directly supporting core activities | ✅ |

### Key Eligibility Factors for RateRight:

**Strengths:**
- AI/ML model for construction marketplace is genuinely novel
- No existing solution for AI-powered tradie matching in Australian market
- Outcomes genuinely uncertain (will the matching algorithm work?)
- Systematic experimental approach required (training, testing, iteration)

**Documentation Required:**
- Evidence of systematic experimentation (hypothesis → test → result)
- Evidence that outcome was uncertain at project outset
- Technical records of iterations and learnings
- Evidence of new knowledge generated

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## 3. Expenditure Requirements

### Minimum Spend
- **$20,000 minimum** in eligible R&D expenditure per income year
- If under $20,000, must use a registered Research Service Provider (RSP)

### RateRight's Likely Eligible Costs (FY2025-26 Estimate)

| Cost Category | Eligible? | Estimated FY2025-26 |
|--------------|-----------|---------------------|
| AI API costs (Claude, DeepSeek, etc.) | ✅ Yes — core R&D activity | ~$1,500 |
| Developer salaries (if any) | ✅ Yes — if working on R&D | TBD |
| Cloud compute for model training | ✅ Yes — directly supporting R&D | ~$500 |
| Subcontractor R&D (e.g., ML consultant) | ✅ Yes — if registered as R&D with ATO | TBD |
| Standard hosting/admin | ⚠️ Maybe — as supporting R&D | ~$200 |
| Domain, basic software | ❌ No — not R&D | — |

**Likely Total:** ~$2,000–$3,000 for FY2025-26 (assuming no salaries)

**⚠️ Issue:** Below $20,000 threshold — need to either:
1. Accumulate more R&D costs (hire R&D staff, engage consultants)
2. Use a registered Research Service Provider (RSP)
3. Wait until next financial year when costs may exceed threshold

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## 4. Offset Rate

| Company Size | Offset Rate | Refundable? |
|--------------|-------------|-------------|
| <$20M aggregated turnover | **43.5%** | ✅ Yes (cash refund) |
| ≥$20M aggregated turnover | 8.5% above company tax rate | ❌ No (non-refundable) |

**RateRight:** <$20M turnover → **43.5% refundable offset**

### Example Calculation
If RateRight spends $25,000 on eligible R&D:
- Tax offset = $25,000 × 43.5% = **$10,875 cash refund**

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## 5. Critical Deadlines

| Deadline | Date | Action Required |
|----------|------|-----------------|
| **Registration deadline** | 30 April 2026 | Register R&D activities with AusIndustry for FY2024-25 |
| **Company tax return** | Standard lodgement date | Claim offset in tax return |
| **Next year registration** | 30 April 2027 | For FY2025-26 activities |

**⚠️ URGENT:** If RateRight had ANY R&D activity in FY2024-25 (July 2024 – June 2025), registration deadline is **30 April 2026** (≈10 weeks away).

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## 6. Record Keeping Requirements

The ATO requires detailed documentation:

### Must Keep:
1. **Technical records** — Design documents, test results, code commits showing experimentation
2. **Time records** — Timesheets for staff working on R&D
3. **Cost records** — Invoices, receipts for R&D expenditure
4. **Project documentation** — Project plans, hypotheses, iteration logs
5. **Evidence of uncertainty** — Documentation showing outcome was unknown at outset

### Recommended:
- Git commit messages describing experimental nature of work
- Technical blog or wiki documenting R&D journey
- Experiment logs (hypothesis → method → results → conclusion)
- Meeting notes about technical challenges and solutions

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## 7. Recommendations

### Immediate Actions:
1. **Assess FY2024-25 R&D** — Did any R&D activity occur before 1 July 2025? If yes, **URGENT** — register by 30 April 2026
2. **Document FY2025-26 R&D** — Start record keeping NOW for current financial year
3. **Track all AI/ML development** — Label commits, document experiments
4. **Engage R&D tax specialist** — For registration and claim preparation (recommended)

### Medium-Term Strategy:
1. **Accumulate $20K+ R&D spend** — Consider engaging an ML consultant or allocating more resources to R&D
2. **Structure R&D activities** — Ensure work is framed as systematic experimentation
3. **Register by April 2027** — For FY2025-26 claim

### Professional Advice Recommended:
- R&D tax incentive consultant (expect fee: $2K–$5K for claim preparation)
- Tax agent familiar with software/AI R&D claims

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## 8. Key Resources

- **AusIndustry:** business.gov.au/grants-and-programs/research-and-development-tax-incentive
- **Registration portal:** portal.business.gov.au/
- **ATO guidance:** ato.gov.au/businesses-and-organisations/income-deductions-and-concessions/incentives-and-concessions/research-and-development-tax-incentive-and-concessions/research-and-development-tax-incentive
- **Software sector guide:** business.gov.au/grants-and-programs/research-and-development-tax-incentive/sector-guides-for-r-and-d-tax-incentive-applicants/software-development

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*Document: memory/rd-tax-incentive-research.md*  
*Updated: 2026-02-17*