The 2026–27 Federal Budget delivers the most significant restructure of the R&D Tax Incentive (RDTI) in years. Following the government's comprehensive review of R&D policy — Ambitious Australia — the Budget confirms a series of major changes that will take effect from 1 July 2028. Businesses with active R&D programs need to understand what's changing and start planning now.
What's changing
Higher offset rates for core R&D activities
The Budget confirms an increase in the tax offset rates for core R&D activities of approximately 25 to 50 per cent. For eligible small businesses (under the refundable threshold), this represents a meaningful increase in the cash value of each dollar of eligible R&D expenditure.
Increased turnover threshold for the refundable offset
The threshold for the refundable tax offset — currently set at $20 million aggregated annual turnover — will be increased. This means more businesses will qualify for the more generous refundable offset rather than the non-refundable offset available to larger companies.
Reduced R&D intensity measure
The R&D intensity measure (which applies a premium offset rate based on the proportion of total expenditure directed to R&D) will be reduced. This is a positive change for businesses where R&D is not the dominant activity, making the premium rate more accessible.
Increased maximum expenditure threshold
The cap on eligible R&D expenditure will increase, allowing larger R&D programs to access offset benefits on a greater proportion of their total spend.
What stays the same
The fundamental structure of the program — core and supporting R&D activities, AusIndustry registration, ATO schedule lodgement, and the 10-month registration deadline — remains unchanged. The experimental activities test, the requirement for genuine technical uncertainty, and the record-keeping obligations are unaffected.
What this means for your business
- Changes take effect 1 July 2028 — you have time to plan, but should start now
- If you're currently below the refundable threshold, the increased turnover limit may open the refundable offset to you for the first time
- The higher offset rates make it even more important to identify and document all eligible activities
- Businesses that have historically been put off by the intensity measure should reassess their eligibility
Our view
These changes represent a genuine improvement to the RDTI and a signal that the Government is serious about supporting Australian innovation. However, the complexity of the program is not diminishing — if anything, the higher value on offer makes it more important to get the claim right and ensure your documentation is audit-ready.
AHL Advisory is monitoring the detail of these changes closely as further consultation and legislation progresses. If you want to understand how the reforms affect your specific situation, we'd encourage you to get in touch sooner rather than later.
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