2026-27 Federal Budget Announcement – R&D and Innovation Takeaways

Author: Shaun van Dijk

The 2026–27 Federal Budget has landed. And while the headlines are dominated by major policy changes to negative gearing, CGT, discretionary trusts and other tax relief measures, there are some genuinely important developments for Australia’s R&D and innovation ecosystem.

Overview of Key R&D Policies

The Albanese Government is embarking on significant reforms of the R&D Tax Incentive (RDTI). The changes involve refocusing the RDTI toward “young firms”, start-ups and productivity-enhancing investment.

Importantly, the proposed RDTI changes are not expected to commence until 1 July 2028, meaning businesses have plenty of time to digest the reforms, assess the implications and to plan accordingly.

The R&D focused announcements are a first step in the implementation of recommendations from the recently released Ambitious Australia: Strategic Examination of R&D report.

The Budget includes a range of other intriguing start-up focused policy changes to drive innovation and investment including loss refundability for start-ups and an expansion of VC tax incentives.

RDTI Program Reforms

The RDTI is set for significant changes from 1 July 2028. In summary:

• Increasing the turnover threshold for the R&D tax refundable offset from $20 million to $50 million;

• Lifting the maximum RDTI expenditure threshold from $150 million to $200 million;

• Increasing the minimum R&D expenditure threshold from $20,000 to $50,000 (unless the R&D is being undertaken with a registered Research Service Provider or Cooperative Research Centre);

• Increasing the R&D tax offset for core R&D activities by 4.5%;

• Reducing the R&D intensity threshold for larger firms (above $50mill turnover) from 2% to 1.5%, enabling more firms that engage in substantial core R&D to qualify for higher offset rates;

• Removing eligibility of supporting R&D expenditure for the R&DTI;

• Limiting access to the refundable R&D tax offset to the first 10 years of the business, with older firms only able to access a non-refundable offset.

Other Innovation Policy Announcements

Aside from the RDTI program changes, there are a range of other interesting announcements for innovative start-ups, SMEs and investors:

• New “loss refundability” reforms for businesses and start-ups to help business invest and grow in their first 2 years, starting from 1 July 2028;

• Expansion of venture capital tax incentives from 1 July 2027aimed at unlocking more patient capital;

• Permanent establishment of a $20,000 instant asset write-off for small businesses;

• A $387mill funding boost for CSIRO over the next four years;

• Continued investment in critical minerals, energy resilience and manufacturing capability via the National Reconstruction Fund and related initiatives;

• Provision to increase disbursements from the Medical Research Future Fund, from $650 million in 2025–26 to $1 billion annually from 2030–31;

• Accelerating the development and commercialisation of AI by Australian researchers and businesses by making up to $70mill available through upcoming rounds of the Cooperative Research Centres (CRC) and CRC-P program;

• Establishment of a National Resilience and Science Council to better coordinate and align public innovation investments with Australia’s economic objectives.

Unfortunately, no news is bad news for the Industry Growth Program with no mention made in the Budget papers. It would currently seem as though the December cuts will bring the program to a premature end in the next few months.

Australia’s Economic Accelerator, a program to support research commercialisation, is a casualty with the announcement of a reprioritisation of $800mill in unallocated funding bringing the popular program to an unexpected and premature end.

Summary

Overall, this Budget feels like the beginning of a broader shift in Australia’s innovation policy settings with a stronger focus on better targeting of the current R&D incentives and tax policies to young start-ups.

Watch this space over the next few weeks as we unpack the detail, analyse the potential implications for RDTI claimants and innovative businesses, and provide deeper insights into what these changes may actually mean in practice.