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REFERENCE
R&D Tax Sector Benchmarks
Sector-by-sector benchmarking for the Australian R&D Tax Incentive. Direct (core) and supporting/indirect R&D ranges as a percentage of total business expenses, drawn from ATO R&DTI program data, AusIndustry sector guidance and ABS innovation statistics. These bands are educational - sitting outside the range does not by itself imply ineligibility.
Typical - commonly observed direct R&D range Elevated - outside common range but potentially valid Unusual - may benefit from extra substantiation Supporting - indirect activities
Healthcare & Medical
| Sub-sector | Typical | Elevated | Unusual | Supporting | Context |
|---|---|---|---|---|---|
Dental clinics Most clinical dentistry is routine treatment and excluded. Bona-fide R&D usually arises only where the practice runs structured experimental protocols. | 0-3% | ≤8% | >8% | 0-2% | s355-25(2)(b) excludes activities whose outcome can be known from current knowledge. |
General medical practice GP clinics rarely generate experimental work other than registered clinical trials or distinct software arms. | 0-3% | ≤7% | >7% | 0-2% | TR 2021/5 emphasises hypothesis-led experimentation. |
Specialist clinics Surgical and specialist clinics occasionally run formal protocols, device pilots or novel procedure development. | 0-5% | ≤12% | >12% | 0-3% | Eligibility hinges on whether the procedure is genuinely novel and hypothesis-led. |
Radiology / imaging AI-assisted reading, novel imaging protocols and reconstruction algorithms drive a small but real R&D layer. | 0-6% | ≤15% | >15% | 1-4% | Hardware purchases are not R&D; only the experimental development around them may qualify. |
Pathology Assay development, novel reagent validation and LIMS algorithm work can be eligible; routine testing throughput is not. | 1-8% | ≤20% | >20% | 1-5% | Routine production once the underlying knowledge is established falls outside s355-25. |
Allied health Allied health is overwhelmingly service delivery. Eligible R&D usually means a digital tool or novel measured protocol. | 0-3% | ≤8% | >8% | 0-2% | Customary clinical practice is excluded; documented experiments with measurable outcomes may qualify. |
MedTech (device development) Pre-TGA device companies are R&D-dominant. Post-approval intensity falls quickly as manufacturing scales. | 30-70% | ≤85% | >85% | 5-15% | V&V testing required for regulatory approval is generally a supporting activity, not core R&D. |
Biotechnology Clinical-stage biotech runs near-pure R&D until commercial revenues appear. | 40-85% | ≤92% | >92% | 3-10% | Clinical trial activity is supporting where it validates eligible core experimentation. |
Pharmaceuticals (commercial) Once products are on-market, sales, distribution and manufacturing dilute R&D intensity. | 10-35% | ≤55% | >55% | 3-10% | Bioequivalence and routine reformulation often fall outside eligible R&D. |
Digital health / health software Behaves like SaaS but with additional regulatory and clinical-validation supporting activity. | 25-70% | ≤85% | >85% | 3-10% | Validation of algorithm performance against clinical endpoints can qualify if hypothesis-led. |
Technology
| Sub-sector | Typical | Elevated | Unusual | Supporting | Context |
|---|---|---|---|---|---|
SaaS (pre-revenue / early-stage) Engineering headcount dominates the cost base; revenue is yet to scale operations. | 50-80% | ≤90% | >90% | 5-15% | AusIndustry recognises iterative software development where hypothesis-driven, not merely customisation. |
SaaS (revenue-generating) Sales, marketing, support and infrastructure operations dilute intensity once ARR scales. | 15-40% | ≤60% | >60% | 3-12% | Routine maintenance, bug fixes, customer-specific config and BAU DevOps are excluded. |
Custom software dev services Client-funded build work is typically excluded; only internal IP or genuinely novel methods qualify. | 3-15% | ≤30% | >30% | 1-5% | Where the client owns the IP and bears the risk, the work is generally not on own behalf. |
Cybersecurity Detection-engine and protocol R&D qualifies; SOC operations and managed-service delivery do not. | 20-55% | ≤75% | >75% | 3-10% | Threat-intel collection and incident response are operational, not experimental. |
AI / ML Model architecture, training-regime experimentation and evaluation methodology drive direct R&D. | 35-75% | ≤88% | >88% | 5-15% | Applying off-the-shelf models without genuine algorithmic uncertainty is typically not eligible. |
Data platforms / analytics Pipeline and query-engine R&D qualifies; dashboard configuration and data-ops do not. | 20-50% | ≤70% | >70% | 3-10% | Performance optimisation can qualify only where measurable hypotheses are documented. |
FinTech Core ledger, risk-engine and protocol work qualifies; KYC, compliance ops and licensing do not. | 25-55% | ≤75% | >75% | 5-15% | Regulatory compliance work is excluded; underlying engineering uncertainty may still qualify. |
Deep tech / R&D-heavy startups Quantum, photonics, advanced materials, novel semiconductors etc. often have minimal non-R&D spend. | 50-90% | ≤95% | >95% | 3-12% | Capital equipment purchases are not R&D; their consumable use during experiments may be. |
Hardware Prototype iteration, EVT/DVT cycles and test-rig builds drive intensity; production tooling is excluded. | 20-55% | ≤75% | >75% | 5-15% | Reverse-engineering existing products is separately excluded under s355-25(2)(g). |
Pre-revenue tech startup (general) Headcount is engineering-heavy; commercial functions are minimal. | 45-85% | ≤92% | >92% | 5-15% | Founder time can be claimed at reasonable apportionment if directly engaged in experimental activity. |
Engineering & Manufacturing
| Sub-sector | Typical | Elevated | Unusual | Supporting | Context |
|---|---|---|---|---|---|
Advanced manufacturing Process and product development qualifies; serial production is excluded. | 8-25% | ≤45% | >45% | 3-10% | Routine production once knowledge is established is not a core activity under s355-25. |
Industrial manufacturing Capital-intensive operations with concentrated, episodic R&D around new lines or retools. | 2-10% | ≤20% | >20% | 1-5% | Capital equipment is depreciable; only the experimental use of it is potentially eligible. |
Food manufacturing Recipe development, shelf-life trials and process scale-up may qualify; existing-product runs do not. | 2-10% | ≤20% | >20% | 1-5% | Routine QC, regulatory labelling and packaging changes are excluded. |
Chemical manufacturing Formulation, catalyst and process R&D can sustain a meaningful intensity layer. | 4-15% | ≤30% | >30% | 2-7% | Scale-up trials must be hypothesis-led to remain eligible; routine bulk production is not. |
Industrial / mechanical engineering Project-based, with R&D concentrated in prototyping and validation phases. | 3-12% | ≤25% | >25% | 1-6% | Standard engineering design from established principles is not eligible. |
Mining equipment / METS Equipment design, autonomy software and processing innovation drive intensity. | 5-20% | ≤40% | >40% | 2-8% | On-site trials may be supporting; routine maintenance is not eligible. |
Materials science Pre-commercial materials companies are R&D-dominant; scale-up shifts the ratio. | 25-70% | ≤85% | >85% | 3-12% | Characterisation testing may be supporting where it validates hypothesis-led experimentation. |
Construction & Property
| Sub-sector | Typical | Elevated | Unusual | Supporting | Context |
|---|---|---|---|---|---|
Residential construction Residential build is overwhelmingly routine. Genuine R&D usually involves novel materials or modular systems. | 0-3% | ≤8% | >8% | 0-2% | Customary trade practice is excluded (AusIndustry Building & Construction guidance). |
Commercial construction Project-based, with rare experimental work around novel facade, structural or services systems. | 0-3% | ≤8% | >8% | 0-2% | First-of-type problems within Australia can qualify if hypothesis-led and documented. |
Modular / prefab construction Connection systems, load-path verification and factory-process R&D drive eligible activity. | 3-12% | ≤25% | >25% | 1-6% | Recurrent production runs of a validated module are excluded. |
Construction technology (ConTech) Software, robotics and digital-twin platforms behave like SaaS / hardware. | 25-65% | ≤82% | >82% | 5-15% | Pure construction services delivered alongside the platform must be carved out. |
Ranges synthesised from public ATO R&DTI program statistics, AusIndustry sector guidance and ABS innovation surveys. Not legal or tax advice - confirm with your registered tax agent before lodging.
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