The 2026-27 Federal Budget landed a proposal that has deep tech, biotech, and medtech founders on the phone with their advisers: a 10-year age limit on the refundable R&D Tax Incentive. The government frames it as part of the Ambitious Australia roadmap to modernise the research system. Founders in long-cycle industries see it differently.
What is the 10-year R&D tax refund cap? It’s a proposed change to Australia’s R&D Tax Incentive that would limit refundable cash offsets for R&D losses to a company’s first 10 years of operation. From 1 July 2028, companies past that age would still get the higher offset rate, but only as a non-refundable tax credit against future profit, not a cash payment. It’s not the law yet. The rules stay as they are until then, and the design is still open for consultation.
Right now, a company can claim the R&D Tax Incentive for as long as it meets the eligibility rules, no matter how long it’s been trading. Under the proposed reforms, set to apply from 1 July 2028, that changes. Cash refunds for R&D losses would only be available in a company’s first 10 years.
Why 10 Years Falls Short
A decade doesn’t match how science-based innovation actually plays out. Industry groups have been blunt about it: 10 years is not a long stretch in deep tech.
The 17-year average. The government’s own Department of Health data puts the average time to bring a medical product to market at 17 years. The proposed cutoff is 10.
R&D intensity peaks late. Many deep tech and biotech firms, in fact, reach peak R&D spending in year 10, and expenditure remains high as they progress with late-stage clinical trials or construct their first full-scale commercial facility. That’s the most expensive part of the whole process, and it’s exactly when the refund disappears.
More than one valley of death. Companies cross several “valleys of death” on the way to revenue: discovery, pre-clinical work, and regulatory approval. None of that pays the bills. The cash refund is often what it does.
| Category | Proposed cap | Sector reality |
| Refundability cutoff | 10 years | Average medtech product timeline: 17 years (Department of Health data) |
| Possible carve-out | 15 years for biotech/medtech startups (under consultation) | Still short of the 17-year average |
| Turnover threshold for refund | $20 million rising to $50 million | Applies only if the company is under the age cap |
| Effective date | 1 July 2028 | Current rules apply until then |
A Triple Threat
Industry groups are calling the 10-year cap one part of a triple threat, alongside the overhaul of capital gains tax discounts and the removal of “supporting activities” from R&D eligibility.
Swapping a cash refund for a non-refundable tax credit does little for a company that’s still pre-revenue and posting losses. Without that working capital, some startups won’t be able to keep their research onshore. In short, a tax credit only helps once you’re making money to offset it against, and pre-revenue R&D companies aren’t.
Economic Stakes and the Brain Drain Risk
Seventeen industry bodies, including AusBiotech, BioMelbourne Network, and ANDHealth, wrote to Treasurer Jim Chalmers in June 2026 asking for a meeting and a proper consultation process before the rules are locked in.
The numbers behind that letter are worth sitting with. Since 2016, biotech has been more significant to the Australian economy than other high-profile sectors like automotive (before its decline) and aerospace. We are also the largest biotech sector in the region, twice the size of comparators from Singapore, South Korea, China, India, and New Zealand. It also supports more than 350,000 jobs. In a sector survey reported in June 2026, roughly three in four biotech and medtech companies said they were already thinking about moving late-stage development and manufacturing overseas if the changes go ahead as proposed.
That’s the real risk here. Not that Australian companies stop doing early-stage research at home, but that they take the expensive, job-heavy part of the work, the part that happens after year 10, somewhere with a more predictable policy environment.
A Possible Sector Carve-out
The government has heard the pushback. The 10-year limit remains the headline policy, but consultation papers now suggest a possible 15-year carve-out specifically for biotech and medtech startups, recognising that their products typically take longer to reach market. The possible extension would likely help to coordinate policy with industry timelines better. However, nothing has been decided yet, so stakeholders should watch this space.
What to Do Now
None of this is law yet, and the government still owes the sector draft legislation. But 2028 is closer than it looks once you account for how long R&D planning takes.
- Work out your age and turnover position. With the refundable turnover threshold rising from $20 million to $50 million, some mid-tier companies will gain fresh access to refunds, but only if they sit under the 10-year (or possibly 15-year) age cap model where your company lands in FY29.
- Time your R&D programs. If you’re approaching the 10-year mark, build the shift from a refundable offset to a non-refundable credit into your cash flow projections now, not in 2028.
- Get involved in the consultation process. The detailed design of this legislation is still being developed, and industry bodies are urging the government to engage with stakeholders. If the age cap impacts your company, actively raising concerns through your industry association now can influence the final policy, rather than waiting until rules are set.
A 10-year limit might suit a software company. It doesn’t suit a medical device company still years from its first sale.
Also read: 7 R&D Tax Incentive Changes in the Budget 2026-27 Shake-up
Frequently Asked Questions (FAQs)
When does the R&D tax refund cap take effect? It is proposed to apply from 1 July 2028 But not law yet, and the current rules stand until then.
Does the 10-year limit apply to every company claiming the R&D Tax Incentive? It only applies to the refundable cash offset for companies in a tax loss position. Companies over 10 years old would still get the higher offset rate, just as a non-refundable credit rather than a cash refund.
Could the age limit be extended for biotech and medtech companies? Consultation papers have floated extending it to 15 years for startups in those sectors, given their longer development timelines. Nothing is settled.
What happens to a company’s R&D offset after year 10? It doesn’t disappear. It converts from a refundable cash payment to a non-refundable tax credit, which only has value once the company is profitable enough to use it.
