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Reports that R&D Tax Changes to be announced in May 2026 Federal Budget

The 2026–27 Australian Federal Budget will be delivered by Treasurer Jim Chalmers on Tuesday, 12 May 2026.

The AFR has reported today that:

• Treasurer Jim Chalmers is expected to raise the current $150 million cap on R&D expenses that can be claimed, in a move that will immediately help tech giant Atlassian and hearing device maker Cochlear, but is also aimed at making Australia a more internationally competitive investment destination.
• A review of the R&D and innovation system led by Tesla chairwoman Robyn Denholm recommended the current $150 million cap on R&D expenses be axed, similar to the United States – a call backed by the Business Council of Australia. But industry sources said Treasury did not support an uncapped threshold, and the government is instead likely to raise the cap to between $250 million and $300 million.
• Several sources said the cost of lifting the $150 million R&D expenses cap would be offset by other savings in the program. The reviewers proposed lifting the claims threshold from $20,000 to $150,000 to target the incentive at ambitious, high-impact activities, which would save the budget money.
• Denholm, along with three other authors of the report, have been invited to Canberra next week for a briefing on the changes, which will only touch the R&D tax incentive. Other recommendations from the review will be dealt with separately following a consultation process led by Industry Minister Tim Ayres.

The government released its Strategic Examination of R&D final report in March 2026 which proposed some very ambitious changes to the R&D Tax Incentive.

Whilst everyone will need to wait until budget night to attain details of any specific changes, Swanson Reed would welcome an initial step of increasing the R&D Expenditure Cap threshold, and applaud The Government for such a measure. However, we are concerned about the report of an increase in the cap being offset by other savings in the R&D Tax program.

It’s possible that the indicated savings may relate to the previously announced exclusion from eligibility of Gambling and Tobacco companies, however if there are additional savings planned (for example by increasing the expenditure threshold) this would be concerning.

Swanson Reed will continue to advocate for a stable and sustainable R&D Tax Incentive and will provide an update following the 2026 Federal Budget announcement.

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.