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Law now passed to exclude tobacco and gambling activities from eligibility under R&D Tax Incentive

The December 2024 Mid‑Year Economic and Fiscal Outlook (MYEFO) was released by the Government on 18 December 2024 and announced that The Government will exclude activities related to gambling and tobacco from Research and Development Tax Incentive eligibility for income years starting on or after 1 July 2025.

This proposal can probably be linked to the transparency reporting of R&D claimants and public reaction regarding large claims made by gaming software companies.

The Government then released an exposure draft in December 2025, releasing Treasury Laws Amendment Bill 2025: Exclusion of tobacco and gambling related activities from the Research and Development Tax Incentive which is the legislative instrument that would enact the announced exclusion.

Amendments to the Income Tax Assessment Act 1997 have now been passed into law, excluding R&D activities related to tobacco and gambling from the R&D Tax Incentive (R&DTI).

This exclusion applies to income years starting on or after 1 July 2025 (FY26).

As per a release from the DISR during the week:

• R&D activities solely aimed at stopping or minimising harm, such as addressing addiction, will remain eligible for support provided these activities meet the legislated criteria for core or supporting activities.
• Gambling-related R&D 
  • Gambling-related R&D may still be eligible to receive support under the R&DTI, if it is undertaken for the sole purpose of minimising harm to a person, or, more broadly, the Australian community.
• Tobacco-related R&D
  • Tobacco-related R&D may still be eligible as core or supporting R&D activities under the R&DTI, if it is:
    • related to the development of a therapeutic good which aims to minimise harm from tobacco use, or
    • intended to stop the ingestion or transfer of nicotine into the human body.
• The R&DTI remains open to all industries and sectors that are conducting eligible R&D. 
• If you have conducted R&D related to tobacco or gambling from 1 July 2025, the Department of Industry, Sciece and Resources strongly recommends reviewing the updated legislation and considering how these changes apply to you. 

Swanson Reed does not advocate for the gaming or tobacco industries and we recognise that significant public harm can result from exposure to gambling and tobacco. Following this announcement, however, we expressed concern about the unprecedented approach of excluding new activities/industries from eligibility, going beyond the original excluded activity list that originated from the R&D Tax concession legislation commenced in 1985.

Regardless of our views, the exclusions are now law. All companies and advisors considering registration under the R&D Tax Incentive must be aware of, and abide by the new exclusions.

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.