R&D Tax Facts 2026 Issue 2
Author: Shaun van Dijk, Dale Prebble
Our R&D Tax Facts is a summary of important developments in the world of the R&D Tax Incentive (RDTI) over the last 3 months. More detailed articles on government funding programs and strategies can also be found on the Insights section of our website.
2026-27 Federal Budget Recap
While the 2026-27 Federal Budget headlines were dominated by major policy changes to negative gearing, CGT and discretionary trusts, there were some genuinely important developments for Australia’s R&D and innovation ecosystem, including significant reforms proposed for the RDTI.
The first point to note is that the proposed RDTI changes, if legislated, will only take effect from 1 July 2028, meaning businesses have plenty of time to digest the reforms, assess the implications and to plan accordingly. The RDTI reforms are also a first significant step to implement recommendations from the recently released Ambitious Australia: Strategic Examination of R&D report. See below a summary of the proposed RDTI program reforms that were announced.
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 activity expenditure for the RDTI;
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.
In summary, these RDTI reforms appear to be part 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.
For further analysis of the impacts of proposed RDTI reforms, see our in-depth Beyond the Budget article series, including analysis of the potential impacts based on company revenue, age and tax position, available here.
Changes to Legislation Excluding Tobacco and Gambling Now Law
Amendments to the Income Tax Assessment Act 1997 excluding R&D activities related to tobacco and gambling from the RDTI program are now finalised and enshrined in Australian income tax law.
This exclusion applies to income years starting on or after 1 July 2025, however R&D activities solely aimed at stopping or minimising harm, such as addressing addiction, will remain eligible within the RDTI program provided these activities meet the legislated criteria for core or supporting R&D activities. These limitations to the tobacco and gambling exclusions are applied as follows:
Tobacco-related R&D
Tobacco-related R&D may still be eligible as core or supporting R&D activities under the RDTI, if it is:
related to the development of a therapeutic good which aims to minimise harm from tobacco use, or
intended to stop the ingestion or transfer of nicotine into the human body.
Gambling-related R&D
Gambling-related R&D may still be eligible to receive support under the RDTI, if it is undertaken for the sole purpose of minimising harm to a person, or, more broadly, the Australian community.
The RDTI remains open to all other industries and sectors that are conducting eligible R&D.
If you have conducted R&D related to tobacco or gambling from 1 July 2025, DISR strongly recommends reviewing the updated legislation and considering how these changes apply to you.
2023-24 ATO Transparency Report
The ATO is preparing to publish its next RDTI transparency report in September 2026.
The report will be third iteration and include data from R&D claims made for the 2023–24 financial year. It will also cover outstanding or amended 2022–23 and 2021–22 claims not published in the previous years' reports.
This initiative aims to enhance transparency, shed light on the benefits derived by companies, and encourage voluntary compliance with the R&D program. Importantly, there is no opportunity to ‘opt-out’ of this reporting.
Upcoming RDTI Information Sessions
DISR has announced upcoming R&D tax webinar dates. This includes an RDTI introductory session focused on the basics of the program (29 July 2026) and a specific topic session focused on software-related R&D activities (9 September 2026).
Registrations for these information sessions can be completed by visiting the RDTI information sessions page.