Australia’s R&D Tax Incentive Changes: What Businesses Need to Know and How to Prepare

2028 R&D Reform Roadmap

The Australian Government has announced significant reforms to the R&D Tax Incentive in the 2026–27 Federal Budget. While the current rules remain in effect until 1 July 2028, these changes represent the most significant update to the program in years. The shift focuses on prioritizing “core” experimental R&D, meaning businesses should start aligning their documentation and project scoping now to ensure a seamless transition and maximize future benefits.

Key Reforms for 2028

Focus on Core R&D

Supporting activities will no longer qualify. The incentive is shifting entirely toward “core” experimental work. To compensate, offset rates for core activities are increasing by 4.5 percentage points.

Updated Eligibility

The turnover threshold for the highest offset rises to $50M. However, cash refunds are now restricted to companies in their first 10 years of operation, and the minimum claim spend increases to $50,000.

Higher Standards

Regulators are placing a premium on contemporaneous documentation—evidence created at the time of your project. Preparing for increased ATO scrutiny is now a critical part of the R&D lifecycle.

How to Prepare Today

1

Audit Your Costs

Categorize your expenses now. Identify which projects are “core” versus “supporting” to understand the impact on your 2028–29 financials.

2

Prioritize Records

Regulators now require proof of experimentation created at the time of the project. Ensure your technical notes, testing logs, and design iterations are stored centrally and updated as you work.

3

Map Your Business Age

Review your company’s incorporation date to plan for the 10-year refundability limit. This is crucial for long-term cash flow forecasting.

4

Early Assessment

Don’t wait for tax time. Reviewing projects at the commencement phase helps capture the evidence required under the new, stricter guidelines.

Frequently Asked Questions

Yes, under current rules. From 1 July 2028, these will no longer be eligible, and the program will focus strictly on “core” experimental R&D.

Starting 1 July 2028, only businesses incorporated for less than 10 years can receive cash refunds. Older businesses remain eligible for the incentive as a non-refundable tax credit.

The threshold is rising from $20,000 to $50,000. If your spend is below this, you must work with a registered Research Service Provider to remain eligible.

The goal is to better target funding toward genuine, high-impact innovation and reduce the focus on routine business activities.

Final Thoughts

The R&D Tax Incentive remains one of Australia’s most valuable innovation programs. While the shift to “core-only” R&D and stricter compliance may seem daunting, businesses that proactively strengthen their documentation and project scoping will be better positioned to benefit. Now is the time to review your internal systems and prepare for the future of R&D claiming in Australia.

(Note: This content is based on the 2026–27 Federal Budget announcements. Further legislation and consultation will follow before the 1 July 2028 start date.)