DISR's Note on R&D Loans: Kashcade’s Response

Author

Alex Simmons — Co-Founder & CEO, Kashcade

Alex has extensive experience in business lending and R&D finance, and has overseen tens of millions in non-dilutive capital funded to Australian startups.

DISR recently published a note in The R&D Tax Incentive Insider reminding companies to understand the risks of borrowing against an expected R&DTI refund. It's a sensible piece of guidance – one we think is worth unpacking.

We’ve funded over 200 R&D loans to Australian tech companies in the last 12 months, and over 400 across the past few years. Of those, none have resulted in an adverse finding from DISR or the ATO, and we have never placed a borrower into administration or enforcement. We share this because it demonstrates that real value can be created for borrowers when eligibility risk is taken seriously at every stage of the R&D lending process.

Here’s how we do it in practice. We hope it’s useful for R&D advisors working with clients who are considering R&D finance.

What DISR actually said

The core message is straight forward: if a company borrows against an expected R&DTI refund and the claim is later found ineligible, they could be left with a loan and no offset to repay it. DISR's practical recommendations include rigorously self-assessing eligibility before committing to finance, keeping contemporaneous records, understanding that registration does not confirm eligibility, and considering advance findings or private rulings for additional certainty.

This isn't a warning against R&D lending as a practice. It's a reminder that the strength of any loan tied to an R&DTI refund is only as strong as the underlying claim.

I agree.

The risk is real – and we see it first-hand

The eligibility risk DISR describes, and the challenge it creates when carrying an R&D loan, isn’t theoretical. We encounter it regularly in applications we decline.

One example is from January this year.

A second recent example involved a biotech claimant.

These aren’t edge cases. They’re the kinds of claims that, funded without diligence, create exactly the scenario DISR is cautioning against.

How Kashcade approaches this

At Kashcade, we've always operated on the basis that a good R&D loan assessment starts with a good R&D claim and ends with a safe business. DISR's guidance reinforces that approach. To help advisors understand how we assess applications – and how you can help your clients put their best foot forward – here’s what we look at:

• The claim itself. We review the technical narrative and assess whether the registered activities reflect genuine R&D – not just product development repackaged for the incentive. We look for clearly articulated hypotheses, identifiable technical uncertainty, and a methodology that goes beyond standard industry practice.
• The expenditure. We examine the expenditure behind the application: where it’s coming from, what it’s been spent on, whether the narrative aligns with the costs, the proportions per category, whether expenditure has been paid in cash, and the arrangement for any claimed bills payable.
• Source of funds. How has the business been capitalised? Have they raised equity investment, or are directors funding the business through loan notes? If the latter, are there formal loan agreements in place, or is the arrangement undefined and yet to be resolved? Can we help them with that?‍
• The business’s financials. We assess the company’s financial position – primarily their cash runway, balance sheet strength, and capacity to manage through the expected loan term, including a scenario where the refund is delayed or adjusted. Borrowers should welcome this level of diligence; it exists to avoid putting them in a tight spot with a loan liability they can’t comfortably meet.‍
• Their tax position. We review the borrower’s current tax standing, including whether lodgements are up to date across the group – particularly for income tax and GST. While we are not aware of a legal mechanism for the ATO to offset a claimant’s refund against another group entity’s overdue PAYG withholdings, we’ve seen outstanding obligations used as a trigger for closer scrutiny. We also assess the borrower’s tax history: past behaviour is an indicator of future behaviour, and our experience is that the ATO tends to look more closely at taxpayers with consistently overdue lodgements or payments, whether through slower refund processing or direct queries.‍
• Borrower education. We reinforce with every company we work that registration is not confirmation of eligibility, that records matter, and that review, audit, adjustment, or rejection are always possibilities. These aren’t fine-print disclosures – they’re fundamental to making an informed decision about R&D finance.

Ultimately, we want more good companies with solid claims funded. When lenders, advisors, and borrowers all take R&D lending seriously, it strengthens the Australian innovation ecosystem for everyone.

How R&D advisors can help

Although it’s not an R&D advisor’s responsibility to advise their client on whether to borrow, we know they pepper you with questions. If your clients are considering borrowing against their R&DTI refund, here are some practical steps you can consider:

1. ‍Be honest about eligibility. Share DISR's Guide to Interpretation
2. ‍Encourage strong records. Contemporaneous documentation isn't just good practice, it's required. Particularly now, it’s best protection if a claim is queried. Reiterate that your clients maintain sufficient records.
3. ‍Remind claimants of what registration does and doesn't mean. Registering activities with DISR is a necessary step, but it's not a guarantee of their entitlement to a refund. Ultimate eligibility is determined through the review process
4. Query the financial position. If the company isn’t likely to be able to pay its staff or tax bills by the time the loan is due, or has associate expenses that aren’t yet paid, encourage the client to consider whether an R&D loan is a responsible tool at this stage.
5. Consider advance findings or private rulings for material claims. If your client is registering significant R&D expenditure and wants greater certainty when borrowing, DISR advance findings and ATO private rulings are available tools worth exploring.
6. Consider  the lender carefully. A lender that funds without assessing the underlying claim and business is not managing risk comprehensively. And in lending, it’s either a win-win or a lose-lose outcome. Look for a lender that takes the application seriously – it's in the borrower’s interest as much as theirs.

‍The bottom line DISR's note is a constructive reminder, not a red flag. R&D lending, done responsibly, remains an important tool for Australian innovation companies managing the cashflow realities of the R&DTI program.

The key – as it always has been – is ensuring the claim is sound, records are solid, and the lender is doing proper diligence. If you'd like to understand how Kashcade assesses and manages these risks, or if you have questions about your own R&DTI claim, get in touch. 

 Case Study: Identitii

Identitii, a publicly listed fintech company, came to us with $800k in accrued R&D expenditure and an impending cashflow gap ahead of a future capital raise. We reviewed their claim, spoke with their R&D advisor, and were comfortable that the activities and expenditure were well-documented and clearly eligible.

The company was running short on capital and needed to bridge the gap quickly. We funded $640k within 48 hours. Once their refund is paid out, they intend to roll straight into a new loan against their FY26 claim that same day.

That’s what R&D lending looks like when the claim is right, the borrower is informed, and the lender does its job.