Better targeting the Research and Development Tax Incentive – exposure draft

The Australian Government is consulting on legislation to implement reforms to the Research and Development Tax Incentive (R&DTI) from 1 July 2028.

We are seeking feedback on the exposure draft legislation and supporting documents.

We are also seeking views on whether clinical manufacturing research and development (R&D) expenditure should be eligible for the R&DTI.

Proposed changes

The exposure draft legislation would implement reforms announced in the 2026–27 Budget. It also recognises that biotechnology and medical technology firms have unique requirements by allowing them to receive the refundable tax offset for up to 15 years.

The reforms would:

• increase offsets for eligible core R&D activities and remove the eligibility of supporting R&D activities

• reduce the intensity threshold for the non-refundable offset to 1.5%

• increase the turnover threshold for the refundable offset to $50 million

• increase the minimum expenditure threshold to $50,000

• increase the maximum expenditure threshold to $200 million

• limit refundability to firms up to 10 years of age, with an extension for up to 15 years for eligible firms undertaking R&D activities related to therapeutic goods.

The reforms are intended to simplify the R&DTI, encourage additional business investment in R&D and improve the long-term sustainability of the program.

Background

The government announced these reforms in the 2026–27 Budget.

The reforms are the first stage of the government's response to the Ambitious Australia – Strategic Examination of Research and Development final report.

The report recommended changes to simplify the R&DTI, improve its impact and address concerns about program complexity, cost and integrity.

Visit the Budget website for more information.