On 12 May 2026, as part of the 2026–27 Federal Budget, the Government announced it will reform the Research and Development Tax Incentive (R&DTI) to better incentivise business R&D spending in Australia that leads to positive economic spillovers, while moderating growth in the fiscal cost of the incentive.
This measure is not yet law.
Under the measure, there will be 7 key changes to the current R&D regime. The Government will:
- replace the offset on supporting R&D activities with a higher offset rate on core activities by
- removing eligibility of ‘supporting’ R&D activities from the offset
- increasing offsets for expenditure on ‘core’ R&D activities through a 4.5 percentage point increase in the offset rate
- lowering the intensity premium threshold from 2% to 1.5% of expenditure
- focus the refundable offset on high potential firms in need of cashflow support by
- restricting access to refundable offsets to a company’s first 10 years of operation
- increasing the minimum expenditure for a business to be eligible in a given tax year from $20,000 to $50,000
- increasing the turnover eligibility threshold on the refundable offset from $20 million to $50 million
- encourage large scale R&D firms to undertake their R&D in Australia by increasing the maximum expenditure threshold from $150 million to $200 million.
All changes will come into effect from 1 July 2028 and apply to all R&D entities.
For more information, see