Every year, R&D advisers ask SaaS and tech founders for the same thing: a schedule of R&D costs by activity, with records behind every line. If your books were not set up for it during the year, someone ends up rebuilding twelve months of wages and invoices from memory, and that is the weakest kind of evidence you can give.
Published: November 2026
This guide covers what your bookkeeping needs to capture so the handover is quick and the numbers hold up. It is general information only. We do not prepare or lodge R&D Tax Incentive applications or claims. That work belongs with your R&D adviser and tax agent. For the wider finance set-up of a software business, see our guide to SaaS bookkeeping in Australia.
The R&D Tax Incentive is run jointly. Activities are registered with the Department of Industry, Science and Resources through business.gov.au, and the tax offset is claimed in your company tax return with the ATO. Your adviser has to satisfy both, so the request usually covers:
The rules that sit behind the request. For the 2025-26 and 2026-27 income years:
These rates have applied to income years starting on or after 1 July 2021. business.gov.au notes that changes announced in the 2026-27 Budget start from 1 July 2028, and the current rules apply until then.
Our guides to R&D tax consultant fees and the R&D tax incentive estimator cover what advisers charge and how the benefit is worked out.
The simplest way to make costs traceable is to tag them as they are entered, not at year end.
Use a tracking category for R&D activities. Xero lets you have up to four tracking categories, with two active at any time. Set one up called R&D activity, with an option for each activity you expect to register and one for non-R&D work. If you already use both active categories, for example for product line and region, decide now which one gives way.
Code contractor bills at entry. Ask every development contractor to describe the work on each invoice by project, not just "development services". The ATO says contractor documents must hold enough detail to work out how much was spent on R&D activities, as opposed to other goods or services, and must show who owns the results. Tag the bill line to the activity when it is approved.
Separate R&D-heavy cost accounts. Add accounts in your chart of accounts for the costs that are easiest to lose in general expenses: contractor development, cloud and hosting used for testing, and software tools used only by the engineering team. Tracking tells you which activity a cost belongs to. The account tells you what kind of cost it is.
Wages need a second step. Payroll posts to wage accounts in total. To get salaries into activities, take the hours from your time records each month and post a journal that moves wages, super and on-costs into the R&D tracking options. Doing it monthly means the cost schedule exists before your adviser asks.
Our guide to job and project profitability covers the same tagging approach for client work.
Salaries need the most evidence, because the amount you can claim depends on how each person's time was split.
The ATO says you must substantiate the time employees spend on eligible R&D, and that the most accurate method is to keep timesheets or job cards. Where timesheets are not practical, a summary sheet may be acceptable if it is as accurate and reliable as a timesheet. Examples the ATO gives include an employee who works only on eligible R&D, or one on a long project where the split of time stays fairly constant.
What that means in practice for a development team:
Shared costs need their own method. The ATO says no single formula suits every type of expenditure. Costs used over time, such as utilities, may be better apportioned by R&D hours over total hours than by salary dollars. Rent and similar costs may be better apportioned by the floor area used. A ratio of R&D salaries to total salaries is only reasonable for costs that move with pay, such as super, workers compensation and payroll tax, where you cannot identify them separately. Whatever method you choose, you need to be able to explain why it is the most reasonable one, so write it down when you choose it.
Not every cost of building software is R&D. The ATO says expenses without a sufficient link to the R&D activities are ineligible, particularly costs of general company operations or marketing that would be incurred anyway.
Three separations matter most for SaaS businesses:
The tagging decides only where a cost sits in your books. Whether an activity is eligible R&D is a judgement for your adviser and the department, not your bookkeeper.
If the year was run well, the pack takes days, not weeks. Give your adviser:
business.gov.au says R&D records must be kept for 5 years after you claim the expenditure, and the ATO says records that are backdated or vague about the work done are not appropriate.
If you are reporting to investors as well, the same cost data feeds a board pack. Our board and investor reporting service and our guide to what changes in your finance function after a major funding round cover that side. If you want the bookkeeping, payroll and monthly journals run for you, see our outsourced finance services.
Do I need timesheets to claim R&D salaries?
The ATO says timesheets or job cards are the most accurate method. A summary sheet may be accepted where timesheets are not practical, but it must be as accurate and reliable as a timesheet.
How long do I keep R&D records?
business.gov.au says 5 years after you claim the expenditure.
Can I build the records at year end?
You can tidy them, but the evidence should be made while the work happens. The ATO says backdated records are not appropriate, and business.gov.au says records should be created when the activity is conducted.
Is there a minimum spend for the R&D Tax Incentive?
Yes. business.gov.au says R&D expenditure must be at least $20,000 for the income year, unless you use a research service provider or contribute to the Cooperative Research Centres Program.
When is the deadline to apply?
Within 10 months of the end of the income year in which the R&D activities took place.
Does Scale Suite prepare R&D claims?
No. We keep the books, tag the costs and prepare the handover pack. Your R&D adviser and tax agent prepare and lodge the application and the claim.
Scale Suite is a Sydney-based provider of outsourced finance teams and fractional CFO services for Australian SMEs. We deliver weekly bookkeeping, payroll, BAS/IAS lodgement, cashflow reporting, management accounts, and strategic fractional CFO oversight, all as a fully embedded team that works inside your business.
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We review and check this guide periodically. At the time of writing (November 2026), all information was current. Scale Suite is a registered BAS Agent, not a licensed tax advisor or financial advisor. This content is general information only and does not constitute professional tax, financial, or legal advice. Some details may change over time.
Scale Suite is a Sydney-based provider of outsourced finance and HR services for Australian SMEs. We deliver bookkeeping, financial reporting, payroll processing, fractional CFO support, recruitment, employee onboarding, people and culture support, and fractional HR oversight, all as a fully embedded team that works inside your business.
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