How to document R&D so it survives an audit

The R&DTI is self-assessed — your records are the claim

The R&DTI is a self-assessment program. You — the company — decide whether your activities and expenditure are eligible. The ATO and DISR don't pre-approve claims. They review them after the fact. If a reviewer asks you to demonstrate eligibility and you cannot produce contemporaneous evidence, you are not entitled to the offset — regardless of whether the R&D actually happened.

The DISR Guide to Interpretation puts it bluntly: a taxpayer cannot succeed in establishing eligibility in the absence of detailed documentation recording the process of each activity as it develops. Documents created after the fact will generally not be adequate on their own.

Records have to track to the four-part test

Every piece of documentation you create should be traceable back to the four-part core R&D test in s 355–25(1) of the ITAA 1997. If your records can't speak to each element, your claim is at risk. Each element needs its own type of evidence:

Two dates that matter

• Register within 10 months of your income year end (e.g. 30 April for a 30 June year-end). Registration is not approval — it's a declaration that you have the records to support a claim.
• Retain records for 5 years after the income year in which you claimed. Activity evidence, expenditure evidence, linkage evidence, and correspondence with DISR or the ATO all fall under record retention.

Three pillars and five steps

Your documentation must cover three areas at the same time. Think of them as three separate files you maintain throughout the year. Each pillar answers a different question a reviewer will ask.

The five-step scientific method

For each core R&D activity, your documentation must walk through every stage of the systematic progression of work. Click each step to see what to record — and a template you can use.

Supporting R&D activities — what to add

For supporting activities, your records must additionally show:

• Direct relationship. How and why the activity is directly connected to a specific core R&D activity. The connection must be more than incidental — it must be essential to conducting the core activity.
• Dominant purpose (where required). For activities producing goods or services, or activities directly related to producing goods or services: evidence that the primary reason for conducting the activity was to support the core R&D — not to generate commercial output.
• Timing. Supporting activities can occur in a different income year to the core R&D activity they support. Document the temporal relationship clearly.

You don't need a separate R&D documentation system

You need your existing systems to capture the right information. The trick is connecting them into a coherent evidence trail — hypothesis in Notion, experiments in Jira, iterations in GitHub, results in test reports, time in your time-tracker. Click any row to see what to capture in each tool.

Expenditure documentation — the ATO side

The ATO reviews R&D expenditure separately from DISR's activity review. Your records must show three things: that the expenditure was actually incurred, that it was incurred on an eligible R&D activity, and that reasonable apportionment has been applied where expenditure relates to both R&D and non-R&D work.

Common documentation failures

The same handful of failures account for most disallowances:

Run this before you register

Use the checklist as your annual quality check before lodging your R&DTI application. Tick each item you can produce contemporaneous evidence for. State only — your ticks aren't saved anywhere.

Key terms defined

The R&DTI uses specialised legislative language. These definitions refer directly to the legislation and official guidance. The same terms are highlighted inline throughout the article — click any dotted-underlined term to pop up its definition.