One engineering team, two tax systems: organizing US–Australia R&D costs

A shared repository can make an international engineering team look like one operation. Its tax records still need to explain separate legal entities, research locations, contracts and reporting periods. The same pull request may be relevant to several investigations without creating the same tax result in each country.

The 2025 US domestic research-expensing change makes location especially consequential. Australia adds a different set of activity, expenditure and registration requirements. Build a common evidence collection process, then let each jurisdiction’s analysis use it on its own terms.

This is a workflow guide as of 7 October 2026, not a conclusion that a particular group can claim in either country. The examples are fictional and concern US federal rules and Australia’s R&DTI; state taxes and other international tax questions require separate analysis.

Keep deduction timing separate from research credits

US section 174A permits current deduction of qualifying domestic research or experimental expenditure for tax years beginning after 31 December 2024, subject to applicable elections and rules. Foreign research expenditure remains within section 174’s 15-year amortization regime, beginning at the midpoint of the expenditure year. Revenue Procedure 2025-28 explains the implementation and transition procedures. IRS Revenue Procedure 2025-28.

The US research credit excludes research outside the United States or a US territory. A US payer does not make worldwide engineering work credit-eligible. IRS Form 6765 instructions.

Our recommendation is a classification worksheet with separate decisions for deduction timing, credit treatment and management reporting. Do not use one “R&D eligible” checkbox to control all three. When a reviewer changes one decision, the record should show which analysis changed and why.

Identify the entity before applying a country label

Australian R&DTI eligibility begins with whether the claimant is an eligible R&D entity. Australian incorporation is one route; specified foreign-incorporated entities may also qualify through residency or the relevant treaty and permanent-establishment conditions. A global brand name does not answer that question. Australian government entity eligibility guidance.

For each candidate activity, assemble the legal company name, payroll employer, supplier contracting entity and entity that recorded the expenditure. Preserve the intercompany agreement where another group member commissioned the work. Ask a specialist to reconcile inconsistencies before treating a cost export as a claim schedule.

For group-company work, examine the commissioning agreements. Australian law has special provisions for activities conducted for an associated foreign corporation. Do not infer claim ownership from the GitHub organization or assume the Australian claimant must always own the ultimate results. Income Tax Assessment Act 1997, sections 355-210(1)(c) and 355-220.

Treat Australian overseas activity as a separate gate

Australia requires a positive overseas finding before expenditure on overseas activities can be claimed. The application must be submitted before the end of the income year in which the overseas work is conducted or planned; the department says late applications and extensions are unavailable. There are substantive conditions, including the relationship to Australian core work and why the activity cannot be conducted solely in Australia. Lower cost alone is insufficient. A finding also does not settle expenditure eligibility. Overseas-finding requirements.

This timing differs from the ordinary Australian registration deadline of 10 months after income-year end. A year-end review process that is adequate for collecting local records may be too late to address an overseas-finding application. Registration extension and deadline guidance.

Put those decisions in the project kickoff checklist when overseas work is contemplated. Record who owns the question and what the next decision date is. Do not mark the issue resolved merely because a foreign contractor supplied an invoice.

A fictional three-team example

Consider a US parent, an Australian subsidiary and an independent contractor in Singapore working on a forecasting engine. They use the same issue tracker and merge into the same repository. The product team calls everything “Forecast v3.”

For the evidence review, create a more useful activity ledger:

The table deliberately contains questions rather than percentage outcomes. It prevents one project label from flattening different facts into a single cost bucket.

Suppose a senior engineer moved from Sydney to California mid-project. Preserve the dates and explanation instead of assigning the entire year from the employee’s current address. A repository profile location, email domain or office cost center is useful context but does not establish where every activity occurred.

Reconcile without erasing currencies or periods

Keep original amounts and currencies alongside the reporting-currency conversion and its basis. An A$100,000 invoice and a US$100,000 invoice are not comparable just because a dashboard renders “$100,000.” Preserve credits and reversals as well as positive charges.

Keep activity date, service period, invoice date, payment date and accounting posting period separately where relevant. An annual cloud invoice can cover multiple projects and periods. A contractor payment in July can concern work performed earlier. The correct tax treatment is a review conclusion; the raw records should retain enough detail to support it.

For a shared AI account, request usage references that can be connected to the team’s experiments. If the bill mixes model evaluation, production inference and general employee use, show that mix and any unresolved amount. Do not infer research location or qualifying use solely from the cloud vendor’s incorporation or the billing address.

Use one evidence base and separate decisions

AI can help search for project aliases, compare contract references with invoice descriptions and draft a list of missing facts. Keep those suggestions separate from accepted entity, location and allocation decisions. A reviewer should be able to see both the original record and the later interpretation.

An economical first step is one shared project with a bounded date range. Ask the US and Australian advisers to review the same evidence inventory, each against their own rules. Track duplicate requests, unresolved ownership questions and time spent reconciling costs. Those measurements can reveal a practical return from better records without presuming an incentive amount.

Proforma’s initial evidence review supports that starting point through supplied files, supported project notes, available cost records and visible gaps; scoped source collection depends on configuration. Manual preparation remains supported. The result is material a responsible adviser can investigate, while the country-specific tax analysis remains explicit.