The government’s rework of the R&D Tax Incentive lifts the top refund rate to 48 per cent and gives medical technology firms extra years to qualify, but research groups say new restrictions elsewhere will leave them worse off overall.
Biotechnology will receive favourable treatment in the overhaul of Australia’s Research and Development Tax Incentive (RDTI), but representative groups say the changes will leave research institutions worse off than before.
Canberra describes the reforms, released as draft legislation and set to apply from July 1, 2028, as the “first stage” of its response to the Strategic Examination of Research and Development (SERD).
The changes, foreshadowed in the May budget, lift RDTI offset rates by 4.5 percentage points. That takes the rebate for the scheme’s most beneficial component — the premium “refundable” stream for smaller enterprises — from 43.5 per cent to 48 per cent.
In other words, an eligible small biotech company will get back 48 cents for every dollar it spends on core R&D, up from 43.5 cents now.
Where the extra generosity lands
Access to that top rate will also widen. Companies with turnover of up to A$50 million a year will now qualify, up from A$20 million currently, while eligibility criteria loosen for the non-refundable component aimed at larger companies.
Biotech and medical technology firms get a specific concession on top of that. Refundable offsets will generally only be available to companies established within the previous 10 years — but that window stretches to 15 years for research into therapeutic goods or their use, according to the draft legislation.
The extra five-year eligibility window recognises the “unique circumstances of biotechnology and medical technology firms,” which face “longer regulatory approval processes and product development time frames” than their counterparts in other fields, treasurer Jim Chalmers explained.
Treasury is also seeking views on whether research activities related to clinical manufacturing should be eligible for the RDTI, he said.
What gets cut to pay for it
The government plans to tighten other parts of the scheme to fund those changes. “Supporting” R&D activities — pilot studies, literature reviews, preliminary infrastructure checks — will lose eligibility altogether.
The minimum R&D spend required to claim will also rise, from A$20,000 to A$50,000 for most claimants, and the intensity premium threshold will drop from 2 per cent to 1.5 per cent of expenditure.
A budget document estimates the combined package will reduce government spending by a net A$690 million over five years.
The Association of Australian Medical Research Institutes said the five-year extension was “positive” but not enough. CEO Saraid Billiards said biomedical research usually required 15 to 25 years to produce “something tangible” like a drug, device or intervention.
Companies typically did not earn revenue for “15 years or more,” she said.
The RDTI offered direct benefits for companies spun out from medical research institutes, as well as firms that collaborated with institutes, Billiards said.
But the removal of eligibility for supporting activities had alarmed her sector. Background work for clinical trials, such as preliminary data analysis and preparation for regulatory assessment, was often essential, she said.
“What seem like inconsequential changes actually can have quite severe ramifications,” she said. “Hopefully with time and…greater understanding, there can be a pullback on some of those decisions.”
A scheme worth $4.6 billion a year — in a system already falling behind
The RDTI garners roughly A$4.6 billion a year in taxpayer support, more than the combined allocations of the Australian Research Council, National Health and Medical Research Council and Medical Research Future Fund.
It’s propping up a business R&D sector that lags most of the developed world. Australian business spent A$24.41 billion on R&D in 2023-24, up 18 per cent on 2021-22, but that still leaves spending stuck at about 0.9 per cent of GDP — a share that hasn’t shifted since 2017-18.
The OECD average is 1.99 per cent. Professor Chennupati Jagadish, president of the Australian Academy of Science, put the resulting shortfall at A$28.8 billion a year in today’s dollars.
The gap is concentrated at the top end of business. R&D spending by large Australian businesses fell by A$2.9 billion between 2011-12 and 2021-22, even as small business R&D spending grew 84 per cent over the same period, according to Mandala Partners analysis of ABS data.
Health and medical research already accounts for more than a quarter of the country’s total R&D spend, Research Australia estimates — one reason biotech groups are watching the RDTI changes so closely.
“A stretch” to call it Serd reform
Science and Technology Australia (STA) said the overhaul outlined in the draft legislation would leave the RDTI less effective than previously. “The small benefits we’re gaining…don’t make up for the negatives,” said CEO Ryan Winn.
He also said it was “a stretch” for the government to characterise the RDTI overhaul as the first stage of its Serd response. The proposed changes only have a “glimmer of relevance” to the Serd recommendations, he said.
The SERD panel, chaired by Tesla chair Robyn Denholm, delivered 35 recommendations in its final report and explicitly warned the government against cherry-picking from them.
Just one of those 35 recommendations has been realised so far, while another five have been “partially” implemented, according to a “progress scorecard” maintained by STA.
The Council of Australian Postgraduate Associations (Capa) said the increase to the RDTI offset rates was a “genuine improvement,” but the removal of eligibility for supporting activities undermined the work that “makes discovery possible.”
“In real research, the supporting work — the data, the groundwork, the infrastructure around the core experiment — is where many of the vital costs sit,” said Capa president Jesse Gardner-Russell.
Treasury’s consultation on the exposure draft has closed on 28 September 2026.
