Quick answer: Generally, a discretionary trust or an ordinary partnership cannot itself register for or claim the R&D Tax Incentive, because the incentive is only available to an eligible “R&D entity” — broadly, a qualifying company. If your operating business trades through a trust or an ordinary partnership, future activities intended to be claimed may need to be conducted for an eligible company, with the relevant expenditure incurred by that company. This structure needs to be established before the relevant activities and expenditure occur; a company cannot simply be retro-fitted to claim work already conducted by the trust or partnership. Special rules apply to an R&D partnership whose partners are themselves R&D entities.
As at 20 July 2026, the Australian Government had announced reforms to the R&D Tax Incentive in the 2026–27 Federal Budget, intended to apply to income years starting on or after 1 July 2028. Until those changes take effect, the program continues to operate under the current legislation.
If you run a genuine experimental-development program but your business trades through a family trust or a partnership, there is an uncomfortable possibility worth confronting early: genuine experimental activities and the associated expenditure may not be claimable if they were conducted and incurred through an entity that is not eligible for the R&D Tax Incentive.
The R&D Tax Incentive does not attach to "the business" in the abstract. It attaches to a specific kind of taxpayer — an eligible R&D entity — and most trusts and partnerships are not one. At Ignition Research, an Adelaide-based Registered Research Service Provider (RSP000047, Lot Fourteen), the entity question is one we raise before the relevant R&D activities begin, because activities and expenditure already undertaken by an ineligible entity generally cannot simply be transferred retrospectively to a new claimant.
The Short Answer: The Trust or Partnership Generally Can't Claim — an Eligible Company May
Under the R&DTI, only an R&D entity can register activities with the Department of Industry, Science and Resources (DISR) and claim the tax offset through the ATO. The program is jointly administered by AusIndustry and the ATO, and business.gov.au sets out the eligibility gate plainly: you must be an R&D entity to be eligible.
A discretionary or family trust is not, in itself, an R&D entity.
An ordinary partnership of individuals is not, in itself, an R&D entity.
An eligible company may register the activities and claim the offset where the activities are conducted for it and it incurs eligible expenditure, subject to the remaining requirements..
If the operating vehicle that conducts the activities and incurs the expenditure is a trust or an ordinary partnership of individuals, that vehicle generally cannot register for or claim the offset, regardless of the strength of the underlying science. Different rules may apply where a partnership qualifies as an R&D partnership because each partner is itself an R&D entity. The vehicle question sits upstream of everything else: rates, offsets, thresholds and refunds are all irrelevant until an eligible company is the one conducting and claiming the work.
Eligibility depends on your circumstances and must be self-assessed. This article explains the principle; your specific structure should be checked against the law and, where the stakes are high, against your own tax and legal advice.
What Counts as an "Eligible R&D Entity"?
The "R&D entity" concept is defined in Division 355 of the Income Tax Assessment Act 1997. Broadly, an R&D entity is a company, and more specifically one of:
• a company incorporated under an Australian law;
• a company incorporated under a foreign law that is an Australian resident for tax purposes; or
• a foreign-resident company from a country with which Australia has a double-tax agreement, carrying on business through a permanent establishment here.
Important overriding exclusion: even a company that fits one of those descriptions is not an R&D entity if it is exempt from income tax — that is, where all of its income is exempt from income tax under ITAA 1997 s 355-35.
Two further rules matter for owners trading through trusts:
Trustee exclusion: an entity is not an R&D entity to the extent it is acting as a trustee.
Narrow exception: a company that is trustee of a public trading trust for the income year may be treated as an R&D entity.
A public trading trust is a tightly defined tax-law category — not an ordinary family or discretionary trust. Do not assume your family trust qualifies merely because it has a corporate trustee. The public-trading-trust exception is narrow and should be checked against the legislation and with your adviser before you rely on it.
Why Trusts and Ordinary Partnerships Fall Outside
Registration and the offset attach to an eligible R&D entity. A qualifying company registers its activities with DISR and claims the offset in its company tax return. A trust generally cannot register or claim the offset in its own right. A partnership is also not itself an R&D entity and cannot register or claim the offset in the partnership return. However, special rules apply to an R&D partnership where each partner is itself an R&D entity; eligible partners may register separately and claim their respective proportions. For a trust or an ordinary partnership of individuals, even genuine and well-documented experimental activities may not produce an available R&D tax offset where the activities were conducted and the expenditure was incurred through the ineligible vehicle.
A trust lodges a trust return and streams income to beneficiaries; a partnership lodges a partnership return and distributes to partners. Neither of those returns is the vehicle the R&DTI offset flows through, and neither the trust nor the partnership is the R&D entity that can register the activities in the first place.
The wrong-entity problem: even where the R&D is real, experimental and well documented, if the trust or partnership conducted the activities and incurred the expenditure on its own behalf, there is generally no eligible R&D entity standing behind that spend.
The Offset, Once You Are in a Company: What's Actually at Stake
Getting the vehicle right is what unlocks the numbers. The R&DTI offset comes in two forms:
Offset type
Who it's for, broadly
Rate framing
Refundable
Companies with aggregated turnover under $20 million that are not controlled by one or more income-tax-exempt entities
Company tax rate + 18.5 percentage points — 43.5% for a 25% base-rate entity. It can be refunded as cash where it exceeds tax payable.
Non-refundable
All other eligible companies, including those controlled by income-tax-exempt entities regardless of turnover
Company tax rate + 8.5 percentage points on notional R&D expenditure up to and including 2% R&D intensity, and +16.5 percentage points above 2%. Excess is carried forward rather than paid as cash.
Two figures are worth internalising. The 43.5% headline is only accurate for a company that is a 25% base-rate entity with aggregated turnover under $20 million. You also generally need more than $20,000 of total notional R&D deductions to access the offset. Expenditure incurred to a Registered Research Service Provider is not subject to that threshold where the RSP is not an associate of the R&D entity and the services relate to activities within a research field for which the RSP is registered.
All of this presupposes one thing: a company is the claimant. These offset mechanics are not available to a trust or ordinary partnership in its own right. Different rules may apply to eligible partners in an R&D partnership.
Structuring Future R&D Through an Eligible Company
For activities intended to be claimed by a company, the company must be in place and the relevant activities must be conducted for it before those activities and associated expenditure occur.
1. Registration cannot transfer past activities. Registration is annual and must generally be lodged within 10 months after the end of the company's income year. However, registration does not allow a company to adopt activities conducted by another entity before the company existed or before the activities were conducted for it.
2. The company must actually conduct and fund the R&D. Incorporating a company later does not, by itself, allow that company to claim expenditure previously incurred by the trust or partnership. The R&D entity needs to conduct the eligible activities and incur the expenditure on its own behalf.
In practice, this means deciding who owns the IP, who employs or engages the researchers, how the R&D company is funded, and how related-party arrangements are documented. These are structuring decisions to make at the beginning, not paperwork to reverse-engineer after year-end.
Restructuring Is Not Consequence-Free — Get Advice First
Moving an operating business, or an R&D function, out of a trust and into a company is a restructure. Restructures can create tax and legal consequences of their own — potential capital gains tax, potential stamp duty or transfer duty, and legal issues involving assets, employees and contracts.
The practical point: possible concessions may apply in some circumstances, but they are conditional and fact-specific. Fix the structure deliberately with proper tax and legal advice rather than as a rushed year-end exercise.
Worked Example — Illustrative Only
Scenario A — R&D conducted by the trust
A family runs a manufacturing business through the Smith Family Trust and spends money developing a genuinely novel production process. At tax time, the family asks its accountant to claim the R&D. The problem is that the trust conducted and paid for the activities, and the trust is not an eligible R&D entity. There is no company to register the activities or claim the offset. On the facts described, the trust cannot register those activities or claim the R&D tax offset for that expenditure.
Scenario B — R&D structured inside a company before the work
Before the process-development work begins, the family establishes Smith Innovation Pty Ltd as the R&D entity. The company employs the engineers, owns the resulting IP, is funded to perform the work, conducts the experiments and incurs the expenditure on its own behalf. It then registers those activities with AusIndustry within the deadline and claims the offset in its own company return.These facts are illustrative; the entitlement still depends on whether the activities are conducted for the company and whether all other activity and expenditure requirements are met.
On the facts described, only the second structure includes an entity capable of being assessed as an eligible claimant. The decisive step was made at the structuring stage, not in the tax return.
Where an RSP Fits — and Where It Doesn't
A Registered Research Service Provider is an organisation registered to provide R&D services within specified research fields. Ignition Research can assist owners with early R&D scoping, including identifying whether the proposed claimant is an eligible R&D entity and coordinating the entity question with the business's tax and legal advisers. It can also provide R&D services within its registered research fields.
What an RSP cannot do: RSP involvement does not turn an ineligible entity into an eligible R&D entity and does not make an otherwise ineligible activity qualify for the incentive.
Where tax and legal advisers fit: CGT, duty and legal-structure consequences arising from a restructure should be assessed by appropriately qualified tax and legal advisers, ideally alongside the R&D scoping process.
Frequently Asked Questions
Q: Can a discretionary or family trust claim the R&D Tax Incentive in Australia?
A: Generally no. The incentive is only available to an eligible R&D entity — broadly, a company — and a discretionary trust is not one. An entity acting as trustee is generally excluded, with a narrow exception for a company that is trustee of a public trading trust, which a typical family trust is not.
Q: Can a partnership claim the R&D Tax Incentive?
A: Generally no. An ordinary partnership is not an eligible R&D entity, so it cannot register R&D activities or claim the offset in the partnership return. The offset attaches to a company as the R&D entity.
Q: I've been doing R&D inside my trust — can I restructure into a company and still claim?
A: You may restructure so that future R&D activities are conducted for an eligible company, but incorporating a company later does not generally allow it to claim activities already conducted or expenditure already incurred by the trust. The company must actually conduct and fund the work during the relevant income year.
Q: Do I have to set up the company before I start the R&D, or can I fix it at tax time?
A: Before. The company needs to be the entity that conducts the activities and incurs the expenditure during the income year, and it must register those activities with AusIndustry within the applicable deadline.
Sources & Further Reading
business.gov.au — Getting help from a Research Service Provider
legislation.gov.au — Income Tax Assessment Act 1997, Division 355
Related: what the R&D Tax Incentive is
Related: what does not qualify
Related: the registration deadline
Talk to Ignition Research before you register or restructure. If you trade through a trust or ordinary partnership and are undertaking genuine experimental development, the entity question is best considered before the relevant activities begin. An eligible company may be able to conduct and claim future R&D activities, but it cannot simply adopt activities already conducted or expenditure already incurred by another entity.
Note: The Australian Government announced reforms to the R&D Tax Incentive in the 2026–27 Budget, intended to apply to income years starting on or after 1 July 2028. Until those changes take effect, the program continues to operate under the current legislation. Readers should check the latest official guidance before relying on the future measures.
This article provides general information only and does not constitute tax, legal or financial advice. Eligibility for the R&D Tax Incentive depends on the specific entity, activities, expenditure and circumstances involved. Businesses should assess their circumstances against the legislation and current official guidance and obtain independent professional advice where appropriate.
