Significant concerns over announcement in May 2026 to limit Refundable R&D Tax Offset to firms operating less than 10 years

May 18th, 2026 Significant concerns over announcement in May 2026 to limit Refundable R&D Tax Offset to firms operating less than 10 years

Swanson Reed’s initial analysis of the R&D announcements in May 2026 are summarised here.

After we considered these proposed changes in greater detail, we are particularly alarmed about a proposed change announced in the Budget to the R&D Tax Incentive that we feel has not been communicated well nor understood by those whom it may impact…

We fear the announced proposal to limit access to the Refundable R&D Tax Offset to firms operating less than ten years will be determined based on an R&D company’s date of incorporation.

This will potentially mean that from 1 July 2028 (for FY29), companies that were incorporated prior to around July 2018 will no longer qualify for the Refundable R&D Tax Offset, and will no longer receive a current year cash benefit from the R&D Tax incentive if they are in a tax loss position.

This is a potentially catastrophic proposal that we are concerned has not been thought through, and will significantly harm high-tech or life sciences industries, which require long lead times to generate revenue and even longer lead times to generate taxable income. Under this proposal, only companies that are in a tax payable position would derive a cash benefit from the access to Non-Refundable R&D Offsets available to them after ten years of existence.

Whilst the Strategic Examination of R&D final report recommended that ‘Ongoing access to the refundable component of the RDTI scheme should be linked to a company’s revenue growth trajectory’, a shut off of access to Refundable R&D Tax Offsets for companies incorporated before around July 2018 may cause a severe funding cliff and potentially impact the viability of many firms.

As an example of the potential impact of this, we briefly analysed some of the 20 largest Refundable R&D Tax Offsets reported in the public domain over the past 18 months, alongside their incorporation date. Nearly all of these companies may lose access to the refundable R&D Tax Offset from 1 July 2028 based on the proposed change:

Company Approximate amount of Recently Reported Refundable R&D Tax Offset

*Source ChatGPT and Gemini

Incorporation Date

*Source ASIC

Potential Loss of Refundable R&D Tax Offset in FY29  (assuming loss of eligibility if incorporated prior to 1 July 2018)
Group 6 Metals $14.3M 15 Dec 1966 Yes, may lose access to Refundable Offset from FY29 based on proposed change
Imugene Limited $12.6M 17 Jul 1985 Yes, may lose access to Refundable Offset from FY29 based on proposed change
Latrobe Magnesium $12.5M 28 Feb 1986 Yes, may lose access to Refundable Offset from FY29 based on proposed change
Mesoblast Limited $10.3M 08 Jun 2004 Yes, may lose access to Refundable Offset from FY29 based on proposed change
Alpha HPA $9.63M 31 Oct 2003 Yes, may lose access to Refundable Offset from FY29 based on proposed change
Microba Life Sciences $8.3M 07 Feb 2017 Yes, may lose access to Refundable Offset from FY29 based on proposed change
Clarity Pharmaceuticals $6.7M 16 Sep 2010 Yes, may lose access to Refundable Offset from FY29 based on proposed change
4D Medical $6M 17 Dec 2012 Yes, may lose access to Refundable Offset from FY29 based on proposed change
Arovella Therapeutics $6.4M 21 Dec 1999 Yes, may lose access to Refundable Offset from FY29 based on proposed change
Recce Pharmaceuticals $5.34M 13 Nov 2007 Yes, may lose access to Refundable Offset from FY29 based on proposed change
Paincheck Limited $4.8M 16 Oct 2002 Yes, may lose access to Refundable Offset from FY29 based on proposed change
Hazer Group $4.6M 26 Mar 2010 Yes, may lose access to Refundable Offset from FY29 based on proposed change
Race Oncology $3.9M 14 May 2013 Yes, may lose access to Refundable Offset from FY29 based on proposed change
Chimeric Therapeutics $4.5M 02 Feb 2020 No, but will only have a couple of years of eligibility left
Entyr $3.79M 08 Mar 2006 Yes, may lose access to Refundable Offset from FY29 based on proposed change
Starpharma $3.7M 12 May 1997 Yes, may lose access to Refundable Offset from FY29 based on proposed change
Orthocell $3.05M 21 Mar 2006 Yes, may lose access to Refundable Offset from FY29 based on proposed change
Australian Vanadium $2.5M 13 Sep 2005 Yes, may lose access to Refundable Offset from FY29 based on proposed change
archTIS $2.1M 02 Apr 2006 Yes, may lose access to Refundable Offset from FY29 based on proposed change
Readytech $1.9M 28 Oct 2016 Yes, may lose access to Refundable Offset from FY29 based on proposed change
Ecograf $1.7M 04 Dec 2005 Yes, may lose access to Refundable Offset from FY29 based on proposed change

***Note: No clients of Swanson Reed are listed above.

Also, whilst we commend the increase in the turnover threshold to $50M (as proposed by the Strategic Examination of R&D) we feel this may have limited applicability if companies only have ten years of access to Refundable R&D Tax Offsets. Very few companies would reach $50M turnover within 10 years, and this change will benefit only a very small number of high growth companies.

Denial of refundability after 10 years also largely removes the incentive for mature companies (such as those in the manufacturing industry) that may be experiencing tough times/tax losses to be able to use the R&D Tax Incentive to pivot into new or enhanced product lines or business streams.

We call on the Government to urgently fix, and withdraw 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 (as evidenced above) 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 refundability 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.

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