Deep tech and biotech groups have renewed their push this month for the Treasurer to drop a proposed age limit on the refundable R&D tax offset. If you run a startup or a growing business that does R&D, it’s worth understanding what’s on the table.
What’s happening
Treasury consulted on “Better targeting the Research and Development Tax Incentive” in September, with submissions closing on 28 September. The proposed reforms would apply from 1 July 2028. They are proposals only and are not yet law.
The key proposed changes
- The refundable offset would only be available to companies up to 10 years old (15 years for eligible therapeutic goods R&D).
- The aggregated turnover threshold for the refundable offset would rise from $20 million to $50 million.
- Offset rates for core R&D would increase.
- Supporting R&D activities would no longer be eligible.
- The minimum spend would rise to $50,000 and the expenditure cap to $200 million.
- The R&D intensity threshold for the non-refundable offset would drop to 1.5%.
The age-clock trap
Advisers have warned that the age test may count from when the company, or entities connected to it, first started carrying on business. Group restructures and a founder’s earlier companies could therefore start the clock sooner than you’d expect.
Who wins and who loses
Younger, fast-growing businesses with turnover between $20 million and $50 million may come out ahead, because they could access the cash refund for the first time. Established SMEs that have done R&D for more than 10 years would lose the cash refund. Their offset would become non-refundable, so it only helps if the company is paying tax.
Supporting R&D is going
If the changes go ahead, only core R&D activities would qualify. Start separating core and supporting activities in your project records now, so you’re ready either way.
Practical steps for founders
- Map your company’s age and group history.
- Model refundable versus non-refundable outcomes from the 2028–29 income year.
- Tighten your R&D documentation and time records.
- Think about how the timing of R&D spend and capital raising fits together, including early-stage innovation company (ESIC) eligibility for your investors.
The proposals may still change before they are legislated. If you’d like to talk through how they could affect your business, book an R&D and funding strategy session with our Dee Why team.
This is general information only and not personal advice. Sources: Treasury consultation – Better targeting the R&D Tax Incentive; SmartCompany.
