Home » News » Representatives from Australia’s biotech and health tech sector express concerns on proposed changes to Refundable R&D Tax Offset

Representatives from Australia’s biotech and health tech sector express concerns on proposed changes to Refundable R&D Tax Offset

In 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.

In a coordinated effort earlier in June 2026, nine health and life sciences organisations (including AusBiotech, Pathology Technology Australia, MTPConnect, ANDHealth, Life Sciences Queensland and others), have co-signed a letter to Treasurer Jim Chalmers asking for an urgent review of RDTI changes proposed in the Federal Budget.

Some notable extracts from the letter include:

• A ten-year limit on the refundable R&D Tax Incentive and changes to core / supporting claims, combined with proposed changes to CGT, collectively pose a significant triple threat to the growth of Australia’s health and medical technology sector. The potential outcomes also stand in direct contradiction to Australia’s economic ambitions for the sector    
• For many industries, a ten-year limit to the RDTI might be a reasonable timeframe for R&D activities to be supported. For health and medical technologies, however, this proposed timeline grossly underestimates the time needed to successfully navigate the complex development, regulatory and commercial realities faced by our sector.   
•  Within the context of the broader national productivity agenda, it is also critical to recognise the role that R&D intensive industries such as health and medical technologies play in the broader sovereign interest. Multiple international reports support the fact that R&D intensive nations have higher levels of national productivity. With Australia’s productivity on the decline, we need to actively pursue strategies which incentivise greater levels of R&D rather than constraining it.
•  For health and medical technology companies, R&D support is not simply a tax mechanism; it is a critical support mechanism during the lengthy pathway to commercialisation. A ten-year cap on the refundable offset fails to recognise the realities of that pathway.  

Swanson Reed largely agrees with these comments and notes that they also apply to businesses in other industries (including advanced manufacturing or other deep technology companies).

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 incrase 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 provide updates as information becomes available and we 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.