Key Takeaways:
1) Keep records throughout the year. Contemporaneous evidence is generally stronger than documentation reconstructed months after the work was completed.
2) Document both activities and expenditure. Technical records help demonstrate eligibility, while financial records substantiate the costs claimed.
3) Use existing business tools. GitHub, Jira, emails, timesheets and testing reports can provide valuable supporting evidence.
4) Review documentation before year-end. Identifying missing records early makes it easier to address gaps while information is still available.
5) Specialist R&D advice matters. Rimon Advisory combines technical, financial and compliance expertise to help businesses prepare accurate, well-supported claims.
Preparing an R&D Tax Incentive claim involves more than identifying eligible activities and calculating expenditure. Businesses must also maintain records demonstrating what experiments were undertaken, why the outcomes were uncertain and how the claimed expenditure relates to eligible R&D activities.
Both AusIndustry and the Australian Taxation Office (ATO) can review R&D claims, making reliable technical and financial evidence essential.
At Rimon Advisory, our dedicated Technical, Financial and Compliance Teams work together to prepare well-supported R&D Tax Incentive claims. This guide explains what records businesses should maintain, how to avoid common documentation mistakes and the practical steps that can help prepare for an ATO or AusIndustry review.
What Makes an R&D Tax Incentive Claim Audit-Ready?
An audit-ready R&D claim is supported by records that demonstrate the eligibility of the activities undertaken and the accuracy of the expenditure claimed.
The R&D Tax Incentive is jointly administered by AusIndustry and the ATO, with each organisation responsible for different aspects of compliance.
AusIndustry assesses the eligibility of registered R&D activities, including whether core activities involved technical uncertainty, systematic experimentation and a purpose of generating new knowledge.
The ATO examines the financial aspects of the claim, including eligible expenditure, supporting financial records and the calculation of the R&D tax offset.
Importantly, registering R&D activities with AusIndustry does not automatically confirm eligibility. Businesses must retain sufficient evidence to substantiate their claims if reviewed.
As explained in Rimon Advisory’s R&D Pro Tips, a well-supported claim should demonstrate that a genuine technical problem existed, the outcome could not be determined in advance, systematic experimentation occurred and the time spent on those activities was reasonable.
What Records Should Businesses Keep for an R&D Claim?
One of Rimon Advisory’s main recommendations is to document R&D activities as they occur, rather than treating record-keeping as an end-of-year exercise.
In our guide, How to Keep Records for a Seamless R&D Tax Incentive Application, we explain that businesses should maintain records showing:
- What R&D activities were undertaken
- How the work was performed
- Who carried out the activities
- When the work occurred and how long it took
- What the activities cost
Technical evidence may include project plans, hypotheses, experiment logs, test results, meeting notes, emails, photos, videos, technical reports and software development records.
Financial evidence may include employee timesheets, payroll records, contractor invoices, agreements, general ledger records, receipts and expenditure apportionment calculations.
The objective is to establish a clear connection between the experimental activities and the costs included in the R&D claim.
Five Practical Steps to Improve R&D Audit Readiness
Rimon Advisory recommends adopting practical record-keeping procedures that can be incorporated into existing business operations.
Step 1: Prepare a High-Level R&D Plan
Before commencing development, prepare a document outlining the R&D projects, technical uncertainties, planned experiments, expected timelines, budgets and personnel involved.
Rimon’s record-keeping guide recommends creating a High-Level R&D Plan and updating it as activities progress.
This helps businesses maintain a structured overview of their projects and provides a starting point for documenting the experimental work undertaken.
Step 2: Record Experiments and Outcomes as They Occur
Maintain regular records of the experiments performed, approaches tested, observations made and conclusions reached.
These records should include unsuccessful experiments, not just successful outcomes.
For example, where an engineering team tests several product configurations, documenting why particular designs failed and how those findings influenced subsequent modifications can help demonstrate the systematic progression of experimental work.
Rimon’s Common R&D Claim Mistakes guide highlights the importance of retaining evidence of failed experiments.
Step 3: Use Existing Project Management Tools
Businesses do not necessarily need specialised R&D software to maintain useful documentation.
Many development teams already use tools such as GitHub, Jira, Slack and other project management platforms.
These tools can contain valuable evidence, including technical discussions, code changes, testing activities and records of decisions made during development.
However, they should demonstrate more than general project progress. The records need to help explain the technical uncertainties investigated, experimental approaches tested and outcomes observed.
Rimon recommends reviewing these systems and extracting relevant evidence rather than relying entirely on retrospective descriptions of R&D work.
Step 4: Maintain Accurate Timesheets and Financial Records
Employee expenditure is often a significant component of an R&D Tax Incentive claim.
Where employees undertake both eligible R&D and non-R&D activities, businesses need a reasonable and supportable method for allocating expenditure.
In R&D Pro Tips, Rimon recommends reviewing timesheets before year-end to confirm that records are complete and time allocations are consistent with the work performed.
Businesses should also retain invoices, payment records and calculations supporting the allocation of contractor, material and other eligible expenditure.
Special attention should be given to expenditure incurred to associates, as specific payment rules may affect when eligible amounts can be claimed.
Step 5: Conduct a Year-End Documentation Review
Before the financial year closes, review the evidence available for each R&D project.
Rimon recommends summarising the key experiments and outcomes, checking timesheets, identifying missing records and organising supporting information in a centralised location.
A year-end review should help answer three important questions:
- Can we demonstrate what experimental activities occurred?
- Do our records explain the technical uncertainties, testing and results?
- Can we substantiate the expenditure attributable to those activities?
Addressing documentation gaps while information is still fresh can make the claim preparation process more efficient and improve readiness for a potential review.
Practical Example: Documenting Software R&D Activities
Consider a software company developing a new data processing architecture to improve system performance.
The development team investigates whether alternative processing methods can reduce latency without compromising accuracy.
During the project, the company maintains Jira tickets documenting technical problems, GitHub commits showing development changes and benchmark reports recording the results of different configurations.
Some experiments produce improvements, while others fail to achieve the intended performance.
Together, these records may help demonstrate the technical uncertainties investigated, systematic experimentation undertaken and conclusions reached.
However, not all development activities within the project will necessarily qualify as R&D. Routine implementation, maintenance and standard feature development must be distinguished from eligible experimental activities.
The government’s Software Development Sector Guide provides further information about software R&D eligibility and documentation.
Common Documentation Mistakes That Can Affect R&D Claims
Based on the practical issues discussed in Rimon Advisory’s published guidance, several mistakes deserve particular attention.
Assuming innovative work automatically qualifies as R&D. A new product or complex development project is not necessarily eligible. The specific activities must satisfy the legislative requirements.
Leaving documentation until claim preparation. Reconstructing technical activities months later can make it difficult to establish what was tested and what was known at the time.
Mixing R&D with routine activities. Businesses should clearly identify eligible experiments rather than treating an entire development project as R&D.
Overlooking unsuccessful experiments. Failed tests and abandoned approaches can help explain the technical uncertainties being investigated.
Claiming expenditure without sufficient supporting records. Employee costs, contractor expenditure and shared expenses should be supported by appropriate evidence and reasonable allocation methods.
Further guidance is available in Rimon Advisory’s article on 10 Tips for Preparing a Successful R&D Tax Incentive Claim.
How Rimon Advisory Helps Prepare Audit-Ready R&D Claims
Preparing a well-supported R&D claim requires an understanding of both the experimental work and the financial expenditure associated with it.
Rimon Advisory follows a structured process involving eligibility assessment, technical documentation, financial calculations and internal compliance review.
Our R&D Claim Process explains how these stages work together.
Initial eligibility assessment: We review the company’s activities, expenditure and structure to assess eligibility for the R&D Tax Incentive.
Technical workshop and AusIndustry registration: Our Technical Team works with the business to understand its experimental activities and prepare the technical report. The application then undergoes an internal compliance review before registration.
Financial assessment and R&D Tax Schedule: Our Financial Team reviews the final financial records, assesses eligible expenditure and prepares the R&D Tax Incentive Schedule. A second internal compliance review is conducted before finalisation.
Tax return preparation and next steps: We provide the completed R&D Tax Incentive Schedule for inclusion in the company’s tax return and assist with relevant questions from its accountant.
This approach helps connect the technical activities with the financial expenditure while providing additional compliance checks before submission.
With more than 2,000 submissions and over 50 years of combined team experience, Rimon Advisory supports Australian businesses across software, AI, engineering, manufacturing and other technology-intensive industries.
Frequently Asked Questions About R&D Audit Readiness
What is the most important evidence for an R&D Tax Incentive claim?
Contemporaneous records documenting technical uncertainties, hypotheses, experiments, observations and conclusions are particularly important. Businesses must also maintain financial records substantiating the expenditure claimed.
Can GitHub commits and Jira tickets support an R&D claim?
Yes. GitHub commits, Jira tickets and other development records can help support an R&D claim if they demonstrate relevant experimental work. However, ordinary development records without sufficient technical context may not establish eligibility on their own.
How long must R&D records be retained?
Businesses must generally retain R&D documentation for at least five years after claiming the expenditure, although longer retention requirements may apply in certain circumstances.
Can R&D expenditure be claimed without timesheets?
Timesheets are a useful way to substantiate employee expenditure, but other reliable records may support a reasonable allocation of employee time to eligible R&D activities. The available evidence must adequately substantiate the expenditure claimed.
Does AusIndustry registration mean an R&D claim is approved?
No. Registration does not automatically confirm eligibility. AusIndustry may examine the registered activities, while the ATO may review expenditure and the tax offset claimed.
Preparing a Well-Supported R&D Tax Incentive Claim
Good R&D record-keeping starts long before an application is submitted.
By documenting experiments as they occur, maintaining appropriate financial records and reviewing evidence throughout the year, businesses can improve the quality of their claims and prepare more effectively for potential AusIndustry or ATO reviews.
At Rimon Advisory, our dedicated Technical, Financial and Compliance Teams work together to identify eligible R&D activities, substantiate expenditure and prepare well-supported claims.
If your business is undertaking experimental development and would like specialist assistance with the R&D Tax Incentive, contact Rimon Advisory to discuss your project.
