AI FOMO drives uptake, but R&D tax incentive warnings abound
It is hard to resist the exciting world of artificial intelligence, but for companies hoping to claim R&D tax credits, there are some red flags, BDO partner Melissa Fardone explains.
“Don’t just assume that because you’re spending money on AI, it will automatically be eligible for the tax incentive.”
Australian businesses are slowly getting more and more into artificial intelligence.
While the headlines have focused on the ABS figure of 12 per cent of businesses using AI in 2024/25, other surveys suggest it is far more widespread.
In fact, the government’s own spending tracker found 44 per cent of Australian SMEs at February 2026 were using AI.
And business spending on AI research was the fastest-growing research field, according to the ABS, which found $668.3 million was spent on it in 2023/24.
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“We’re seeing an explosion of companies using AI to make processes faster,” BDO partner Melissa Fardone told InDaily.
“It’s almost like people feel like they don’t want to be missing out on something that’s out there – a bit of FOMO going on out there.”
While adoption might be widespread, Fardone cautioned businesses that are just using chatbots to hold off on thinking this allows them to claim the R&D tax incentive.
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In June, the federal government released some guidance on when AI-related activities might be eligible for the R&D Tax Incentive Program.
This includes developing AI models or using AI within software systems.
Simply using AI does not make a business eligible – businesses need to show genuine experimentation – routine deployment or the work won’t qualify.
Fardone said she was “definitely seeing AI creep into a lot of R&D claims”.
She said the tax office would be scrutinising AI-related claims closely “because it equates to a lot more dollars going out the door”.
“It comes down to what you are trying to do with AI, and a lot of the questions that we’re seeing come back from the regulators are ‘What are you doing?’, ‘Are you trying to develop your own model?’, ‘Are you trying to get a model to do something that perhaps wasn’t originally intended to?’,” Fardone said.
Fardone cautioned businesses to be “very careful” that AI usage was addressing a knowledge gap.
“Don’t just assume that because you are spending money on AI that it will automatically be eligible for the tax incentive,” Fardone said.
“Because it is a very fast-moving space, the government is looking at these sorts of claims more closely.”
Businesses investing in AI may be undertaking activities that could qualify for the R&D Tax Incentive. BDO’s R&D and Government Incentives specialists can help assess eligibility, identify qualifying activities and support businesses through the process.
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