Home » News » March 2025 Federal Budget Update: No material R&D Tax Incentive changes, Strategic R&D Review still underway

March 2025 Federal Budget Update: No material R&D Tax Incentive changes, Strategic R&D Review still underway

Due to the timing of the upcoming Federal election, the 2025 Federal budget was held on on Tuesday 25 March 2025, which is earlier than the traditional May timeslot.

Going into the budget, it was unexpected that there would be R&D Tax Incentive changes announced given that:

• There was a material change announced only recently in the December 2024 MYEFO, which announced exclusion of R&D activities related to gambling and tobacco from eligibility for income years starting on or after 1 July 2025;
• The Government is currently undertaking a strategic examination of Australia’s R&D system that has not yet handed down any recommendations, and the consultation does not close until after the March 25 Federal budget is delivered.

Based on a preliminary review of the 2025 budget material, no material changes seem to have been proposed to the R&D Tax Incentive.

Some key extracts from the 2025-26 budget papers note:

• In the budget papers for the TREASURY PORTFOLIO, the budgeted expenses for the Research & Development Tax Incentive are noted as:
  • 2024-25 Estimated actual: $4,748,146;
  • 2025-26 Budget: $4,546,750;
  • 2026-27 Forward estimate: $4,601,428;
  • 2027-28 Forward estimate: $4,775,068;
  • 2028-29 Forward estimate: $5,009,891.

• In the DISR PORTFOLIO, the following is noted:

o   The government is also supporting AI through the National Reconstruction Fund, the Industry Growth Program and the R&D Tax Incentive (which supported $478 million worth of AI related projects in 2022-23).

• In the Budget Paper No.1, the following is noted:

o   Expenses for the research and development tax incentive administered by the Australian Taxation Office are expected to increase over the period 2025–26 to 2028–29 due to increases in the number and value of expected claims from eligible companies.

Reporting from InnovationAus has highlighted that R&D tax incentive payments are set to fall by almost $650 million over the next five years and possibly linked this to the move to exclude gambling and tobacco firms.

It’s likely that the Government is awaiting the outcome of the strategic examination of Australia’s R&D system before proposing any material changes to industry policy for R&D.

Swanson Reed plans to participate in the consultation process for the strategic examination of Australia’s R&D system and will be advocating for maintenance of a broad based, market driven and stable R&D Tax Incentive system.

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.