Why Success Fees Don’t Belong in the R&D Tax Incentive
The recent AFR article highlighting innovation in pizza crusts and pokies is a reminder that Australia’s R&D Tax Incentive (RDTI) continues to attract scrutiny, not only for how companies claim it, but also for how consultants commercialise access to it.
As the AFR noted:
“With growth targets and fees often tied to the size of the refund, consultants have every reason to see innovation everywhere.
It would not be unusual for a ‘success’ fee of 10–25% of the benefit to be paid … despite the scheme being one of entitlement - “success” is guaranteed if a project is self-assessed as eligible and does not come under review.”
This strikes at the heart of a problem that has existed in our advisory market for years: RDTI success-fee models are not suited to an entitlement-based scheme, and actively misalign incentives in a program that relies on integrity.
The Problem with Success Fees in R&D Tax
Success-based pricing (fees based on a percentage of tax benefit) might sound harmless or even efficient at first glance for a business seeking to claim the R&D Tax Incentive. After all, why not pay only if you get a result?
Because in the R&D Tax Incentive, almost every eligible applicant gets a result. The program is not like a competitive grant where only the strongest applications are funded. There is not a limited funding pool, there is no competitive scoring and there is no assessment panel choosing winners.
The RDTI is an entitlement program. If your R&D activities meet the legislative criteria and you follow the process correctly, you are entitled to the benefit. Almost every eligible claimant receives a refund, not because a consultant “won” it for them, but because the law provides it for businesses that meet the criteria.
Success fees in this context don’t reward performance. When advisors are paid more for bigger refunds, the system becomes optimised for refund extraction, not innovation investment. Success fees reward:
Inflating R&D scope
Normalising aggressive interpretation
Prioritising short-term refund maximisation over program sustainability
Shifting risk onto the taxpayer while consultants share upside without accountability.
This isn’t hypothetical. The ATO has repeatedly stated in industry briefings that success-fee models undermine the integrity framework around the RDTI. When refunds are maximised by stretching definitions rather than applying them, trust erodes for legitimate claimants, compliant advisors, program administrators and ultimately, the innovation ecosystem itself.
Why Our Industry Needs to Lift Standards
Australia faces a global race to commercialise innovation and the RDTI remains one of our most strategically important levers. It underpins early-stage research capability, attracts global investment and fuels emerging industries.
The scale of the program in the context of Australian funding for innovation is huge. According to Science, research and innovation (SRI) budget tables, the RDTI accounts for $4.587 billion of the total $15.1 billion to be spent on Australian Government R&D programs and activities in 2026. The remaining funding is split across 18 other major programs (>$100m spend) and smaller initiatives.
Put simply, the RDTI is far and away the largest mechanism through which the Commonwealth supports innovation.
The system also relies heavily on advisors. As highlighted in a SERD review Issues Paper issued in September 2025, 86% of RDTI claimants engage third-party intermediaries such as R&D tax consultants to access the program.
With rough proportionality, this suggests that advisors collectively help steward close to $4 billion in taxpayer-funded R&D support each year.
The SERD review Issues Paper highlights that “this dependence indicates the program remains overly complex, creating barriers for participation and reducing the net benefit of the incentive.” A sentiment that we agree with.
Unfortunately, with a recent shift to a more detailed “self-assessment” process introduced by DISR in August 2025, this sentiment is not yet being reflected through process.
This significant change to registration, and other changes like it, increase administrative burden and deepen structural reliance on advisors, making the alignment of incentives and professional conduct even more critical to the health and credibility of the program.
Integrity as Competitive Advantage
The RDTI is too important to be treated as a transactional refund instrument. It is a nation-building mechanism. As advisors, our obligation is not to extract the maximum dollar today, but to preserve and strengthen a program that underpins Australia’s innovation capability tomorrow.
Australia has an opportunity here not just to evolve policy settings, but to lift professional standards and build confidence in a cornerstone of our innovation system.