The Entity That Has To Exist First

I sat across from a programme officer at a state counter in Brisbane and watched her open the application before I sat down. She did not look at the technology. She looked at the corporate structure. Foreign-owned subsidiaries get the same federal programmes as locally owned companies. The programmes do not ask who owns the parent. They ask whether the company that signs the funding agreement is incorporated in Australia, carries an active ABN, has a resident director on the ASIC register and can issue a tax invoice. That is the test. None of it has anything to do with the chemistry, the engineering, or the proof of concept. The first file the officer opened was the ASIC extract. The second was the ABN. The technology section sat at the back of the folder, two hundred pages in. Read the order. The programme reads the entity first and the technology second.

Australian company registration is fast. ABN registration is slow. RDTI registration is slower still, and that is the order that matters for a foreign-owned subsidiary that wants a refundable research and development tax incentive. ASIC registration is one to two business days from a standard online filing, with the fee at AUD 636 from 1 July 2026. A full-service registration through a registered agent runs about AUD 900, plus the cost of a registered office, a company secretarial address and the annual ASIC agent fee. ABN and TFN are where the clock stops. A locally owned company gets an ABN in minutes through the Australian Business Register. A foreign-owned applicant goes into a manual verification queue at the ATO because overseas directors and overseas shareholders are flagged for review. Plan on one to four weeks for the ABN, and plan on the GST registration to follow at the same pace once turnover crosses AUD 75,000. Payroll adds a third clock. Superannuation is twelve per cent of salary from 1 July 2026. A clean year of payroll, with payslips, super contributions and STP filings, is what a research claim looks like on the second pass.

Section 201A of the Corporations Act 2001 requires every Australian proprietary company to have at least one director who ordinarily resides in Australia. A foreign owner who has no Australian employee has to buy the role from a resident-director service, and the price is fixed enough to budget for. The market rate in 2026 sits around AUD 6,000 a year plus GST for a passive resident director on a small proprietary company. The role comes with a Director ID, a registered address, and the obligation to attend to ASIC filings, board minutes and the annual statement. A good service also handles the section 188 minutes and the dividend resolutions when the time comes. The price is not the issue. The structural issue is that the resident director has to be willing to put their name on a funding agreement with the Commonwealth. Most will. A few will not, and the conversation that finds out which kind you are dealing with has to happen before the application is filed, not after. Three years is the audit window the ATO uses for RDTI claims. Pick a resident director who plans to be on the register in year five, not a service that has folded in year two.

Refundable and non-refundable are two different products, and the AUD industrial group turnover test decides which one a foreign-owned subsidiary is buying. The research and development tax incentive pays a 38.5 per cent offset on eligible Australian expenditure. If the aggregated group turnover is below AUD 20 million, the offset is refundable. If the group is above AUD 20 million, the offset is non-refundable and only reduces tax in the year of claim. The threshold applies to the worldwide group, not to the Australian entity alone. A foreign parent with EUR 25 million in European revenue has just turned the Australian RDTI into a credit on a future tax bill rather than a cash refund. The structural decision follows from that. A small foreign group uses the Australian entity as the R&D shop and draws cash. A large foreign group uses the Australian entity as a cost-recovery vehicle and writes off the offset against other Australian taxable income. Most published material about RDTI assumes the refundable case. The non-refundable case is the one most foreign-owned subsidiaries actually face. Read the consolidated group accounts before the technology claim. The probability that the offset is refundable is not zero, and most people are pricing it at zero.

The application is the easy part. The company is the hard part.

Section 355-210 of the Income Tax Assessment Act 1997 is the rule that decides whether the research has to be done in Australia, or whether the foreign parent can take the intellectual property home. The Australian entity has to receive the primary benefit of the research. The work has to be conducted solely in Australia. The intercompany R&D agreement has to be in writing. The intellectual property can sit with the foreign parent if the arrangement is documented as a foreign associate deal, and the ATO has published rulings on what documented means. The practical version is straightforward. An Australian subsidiary pays a foreign parent for R&D services rendered offshore, and that foreign parent arrangement is excluded from the offset. An Australian subsidiary pays an Australian subsidiary to do the R&D on Australian soil, with the IP assigned up under a written agreement, and that arrangement qualifies. The minute the IP walks out of Australia without a written agreement, the offset is gone. Four pieces of paper decide the outcome. The intercompany R&D agreement. The transfer pricing memo. The IP assignment. The annual R&D report. None of them are optional.

Federal programmes read the entity. State programmes read the postcode. QLD Ignite Ideas requires a Queensland-headquartered company with under fifty full-time equivalents and bars subsidiaries of larger entities from leading. A foreign-owned Pty Ltd with a Queensland registered office but the parent on the ASIC extract is not eligible, and the conversation with the assessor about what counts as a subsidiary takes longer than the application would have. NSW Net Zero Manufacturing requires New South Wales operations, employees and a competitive single-stage selection. Victoria closed its Energy Tech Manufacturing programme in 2025 after the three-to-one co-contribution cap was hit. Western Australia's Industry Budget Grant requires a Western Australian base and operating footprint. South Australia's RIF requires a South Australian benefit case. ACT ICON requires Canberra. The federal money is portable. The state money is not. Pick the state that matches the engineering team, the supply chain and the existing site, not the state with the largest fund. The probability that the state with the largest fund is also the state where the technology lands is not zero, and most people are pricing it at zero.

A foreign-owned subsidiary can run a clean Australian compliance stack for under AUD 15,000 in year one, and that number is low enough to budget for before the grant application is filed. The line items are fixed. ASIC agent and registered office: about AUD 1,000 a year. Annual accounts and tax return: about AUD 2,500 a year for a small proprietary company. Resident director: about AUD 6,000 a year plus GST. Local bookkeeper on a monthly retainer: about AUD 500 a month. Auditor if turnover crosses the AUD 5 million audit threshold, which most foreign-owned subsidiaries will not in year one. Add it up. Twelve to fifteen thousand dollars a year for a structure that lets a foreign group claim federal and state grants, claim a refundable or non-refundable research and development tax incentive, and run an Australian payroll that satisfies superannuation and STP. The trap is the work that does not bill by the hour. The annual ASIC statement. The Director ID renewal. The lost TFN when the foreign parent cycles the local finance manager. The minute one of those slips, the ATO manual review queue adds another four weeks.

I would build the entity before I built the technology file. I have restructured groups through an Australian subsidiary, and every one of those files opened with the ASIC extract, the ABN, the resident director, the intercompany agreement and a clean year of STP. Five files in a folder, in this order. The corporate structure memo. The audited or reviewed accounts of the consolidated group, with the AUD 20 million turnover test marked up. The Australian tax residency certificate. The intercompany R&D agreement, even if the first year has no R&D. The Director ID and the resident director's signed consent. A folder like that is what a programme officer opens in the first three minutes of an interview. It is also what an ATO auditor opens in the first three minutes of a research and development tax incentive review. The application is the easy part. The entity is the hard part. The probability that the entity is also the bottleneck is not zero, and the grants officer is the first one to read it.