The 2026-27 Federal Budget has announced an increase to the refundable R&D Tax Incentive offset for base rate entities from 43.5% to 48% for years of income starting on or after 1 July 2028.
That’s a 4.5 percentage point rise in the premium paid on top of the corporate tax rate, and it’s the single biggest lever in the whole reform package for a founder running genuine experimentation.
I’ve read a lot of budget papers over the years. Most of them move the needle by half a point and call it reform. This one actually moves it.
The Math Behind the Jump
The RDTI works by stacking a premium on top of your company’s tax rate. Right now, a base-rate entity pays 25% corporate tax and gets an 18.5% premium on top, for a 43.5% total offset. Under the proposed change, that premium goes to 23%, so 25% plus 23% gives you 48%.
Here’s the same math for every bracket:
|
Entity Type |
Tax rate |
Current premium |
Proposed premium |
Current offset |
Proposed offset |
|---|---|---|---|---|---|
|
Base rate entity (refundable) |
25% |
18.5% |
23% |
43.5% |
48% |
|
Non-base rate entity (refundable) |
30% |
18.5% |
23% |
48.5% |
53% |
|
Non-refundable, Tier 1 |
30% |
— |
13% |
— |
43% |
|
Non-refundable, Tier 2 (above intensity threshold) |
30% |
— |
21% |
— |
51% |
A 4.5 point rise on the offset rate sounds small until you turn it into actual dollars back in your account. Depending on your spend and your margins, that 4.5 points can mean a 25% to 50% jump in the incentive value you actually receive. Run your own numbers on this before you assume it’s a rounding error.
Who This Actually Rewards
The government built this rate hike for one type of company: the one that spends most of its R&D budget on core experimental activities, not supporting work around the edges.
Core activities are the ones built on genuine technical uncertainty. You don’t know the outcome going in. You’re testing a hypothesis through a proper progression of work, not running a pilot you’re fairly sure will succeed. If your R&D spend is mostly core, this increase hits you harder than a company splitting its budget across core and supporting activities.
Three groups stand to gain the most:
- Deep tech companies in biotech, medtech, and advanced manufacturing, where working capital during the experimental phase is often the deciding factor in whether a project survives
- Businesses running large-scale research programs that could just as easily happen offshore, since a stronger offset makes Australia a more competitive place to run them
- Companies whose R&D is tightly linked to genuine technical breakthroughs rather than incremental product tweaks
If your R&D program is mostly compliance paperwork dressed up as experimentation, this reform won’t do much for you. If it’s real experimentation, it’s worth a serious look at your forward budget.
When This Actually Kicks In
None of this is law yet. It’s a proposal in the 2026-27 Budget, and the government has set 1 July 2028 as the start date for income years from that point.
That gap gives you two years to plan around it rather than react to it. If you’re deciding whether to bring forward or delay a research program, that timeline matters more than the headline percentage. A project that lands mostly in FY29 and beyond gets the full benefit. A project that wraps up before then doesn’t.
Frequently Asked Questions
What is the R&D Tax Incentive refundable offset increasing to?
The refundable offset for base rate entities rises from 43.5% to 48%, applying to income years starting on or after 1 July 2028, under the proposed 2026-27 Federal Budget.
How is the 48% R&D offset calculated?
Add the entity’s corporate tax rate to the proposed core R&D premium. For a base rate entity, that’s 25% tax plus a 23% premium, giving 48%. For a non-base rate entity at 30% tax, the same 23% premium gives 53%.
Does the 48% rate apply to all R&D spending?
No. It applies to core R&D expenditure — activities involving genuine technical uncertainty and a systematic progression of work. Supporting activities are treated differently under the same reform package.
Is the 48% R&D tax offset law yet?
No. As of August 2026, it’s a proposed measure in the Federal Budget, not enacted legislation. The proposed start date is income years from 1 July 2028.
Which businesses benefit most from the R&D offset increase?
Companies with a high proportion of core, experimental R&D spend see the largest gain — particularly in biotech, medtech, and advanced manufacturing, where the 4.5 percentage point premium increase can translate to a 25% to 50% rise in actual incentive value received.
