Better targeting the Research and Development Tax Incentive, exposure draft

Treasury released an exposure draft on 11 September 2026 to implement the Government's Budget 2026 to 2027 measure better targeting the Research and Development Tax Incentive, with submissions closing on 28 September 2026. The underlying policy was announced in the May 2026 Budget and is not yet law. According to Treasury and Australian Taxation Office materials, the package involves several key changes, including removing the eligibility of supporting R&D activities from the offset while increasing the offset rate on core activities, lowering the research intensity premium threshold from 2 per cent to 1.5 per cent of expenditure, restricting the refundable offset to a company's first 10 years of operation (extended to 15 years for companies undertaking R&D related to therapeutic goods), raising the minimum annual expenditure threshold from 20,000 dollars to 50,000 dollars, raising the turnover eligibility threshold for the refundable offset from 20 million dollars to 50 million dollars, and raising the maximum expenditure threshold from 150 million dollars to 200 million dollars.

If enacted as proposed, the changes would apply to all R&D entities from 1 July 2028. Several industry and professional bodies have raised concerns in their submissions about the proposed 10-year age limit on refundable offset access and the removal of supporting R&D activities from eligibility, arguing these changes could disadvantage capital-intensive or long-horizon R&D projects. As an exposure draft, the measure remains subject to change following consultation and subsequent parliamentary process, and no element of the draft should be treated as settled law.