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Recent media coverage over concerns for proposed 10 year limit to Refundable R&D Tax Offset Eligibility

The Federal Budget handed down on 12 May 2026, The Government proposed major structural changes to the R&D Tax Incentive (RDTI). These changes are proposed to commence on 1 July 2028.

Proposed reforms include:

• Increasing the offset for experimental ‘core’ R&D by around 25 to 50 per cent and removing eligibility for expenditure that only supports R&D. The intensity threshold will reduce from 2 per cent to 1.5 per cent, providing higher offsets to firms undertaking substantial core R&D. Expenditure on supporting activities – such as literature review and equipment maintenance – will no longer be eligible.
• Changing the eligibility criteria for the Refundable R&D Tax Offset by increasing the turnover threshold to $50.0 million. Refundability will now also be limited to firms operating less than ten years, with older firms eligible for an equivalent, non-refundable offset.
• Increasing the maximum expenditure threshold to $200.0 million to allow large businesses to claim more.
• Improving assurance around small claims by increasing the minimum expenditure threshold to $50,000, with R&D below this required to be undertaken with a Research Service Provider or Cooperative Research Centre.

As noted in earlier Swanson Reed updates, we strongly oppose the proposal to limit eligibility for the Refundable R&D Tax Offset to firms operating less than ten years.

Medial coverage on this matter over the past couple of weeks include:

• The Australian has reported how  Australian pharmaceutical and biotechnology start-ups are ­already looking to take their investments to jurisdictions overseas that offer tax advantages,
• The AFR has reported around extensive industry fears over a R&D Tax Offset funding cliff;
• The AFR has also reported that the Robyn Denholm-led panel chosen to review Australia’s innovation system has slammed the Albanese Government’s proposed changes to cap refundable R&D tax offsets to companies under 10 years old;
• InnovationAus has reported how Treasurer Jim Chalmers faces backlash from a coalition of research groups, accelerators and incubators who urge the Albanese government to rethink changes to the R&D Tax Incentive that will limit refundability to startups younger than 10 years.

We continue to call on the Government to urgently reconsider this future proposal to limit access to the Refundable R&D Tax Offset to firms operating less than ten years. We expect that the many companies potentially impacted by this measure will look to potentially change, wind down or even cease operations in the coming year given that that that they will face a funding cliff starting in July 2028.

Potential alternatives to the proposal to limit access to the Refundable R&D Tax Offset to firms operating less than ten years include:

• Remove the proposal to limit access to the Refundable R&D Tax Offset to firms operating less than ten years altogether.
• Or, if a budget measure needs to be implemented, some alternate savings measures that could be considered include:
  • Maintain refundablability after 10 years but increase the turnover threshold from $20M to around $35M (which would probably reflect something close to the original $20M threshold, but adjusted for inflation from FY12 when the $20M threshold was originally set);
  • Remove the proposal to limit access to the Refundable R&D Tax Offset to firms operating less than ten years, but implement a cap on refundable R&D tax offsets that commences after ten years. This cap could be set at a notional level such as $1M for most entities, with an increased cap of $3M for life sciences entities that have an approved finding; OR
  • Remove the proposal to limit access to the Refundable R&D Tax Offset to firms operating less than ten years, but implement a cap on refundable R&D tax offsets that applies to all entities, regardless of age. This cap could be set at some notional level such as $5M for most entities, with an increased cap of $8M for life sciences entities that have an approved finding;

We previously commended The Government for initiating the Strategic Examination of R&D with intention of increasing business investment in R&D, and the reform package announced on 12 May 2026 seems well intentioned. However, limiting access to the Refundable R&D Tax Offset only to firms up to 10 years old is a glaring flaw that needs urgent rectification.

Swanson Reed will make efforts to voice our opposition to this proposal, and would encourage the many impacted companies and stakeholders to also express their concerns.

Swanson Reed will continue to advocate for a sustainable and stable R&D Tax Incentive.

Please get in touch with our office if you require assistance, would like to speak to someone about a potential claim, or check out our website for more information.