Update, September 2026. Treasury released the exposure draft for these reforms on 11 September 2026. The changes below are confirmed, and the draft adds the detail founders most needed on the 10-year refundability limit: the clock starts from when your company began trading, not from your first R&D claim, and a new company can’t reset it. We work through how to find your own cutoff year in our update on the exposure draft.
The 2026-27 Federal Budget delivered the most significant restructure of the R&D Tax Incentive (RDTI) since 2020. Some startups will be materially better off. Some may be materially worse off. And almost none of the changes hit until 1 July 2028, which means you have a planning window, not a panic.
Here is what we think actually matters.
The seven RDTI changes, in plain English
From 1 July 2028, the RDTI looks structurally different. The headline pieces:
- The minimum claim threshold lifts from $20,000 to $50,000. Small claims below $50k will only stay eligible if the work is done through a registered Research Service Provider or Cooperative Research Centre.
- The core R&D offset rate increases by ~4.5 percentage points. For eligible companies that translates to roughly 48% rebate on core experimental R&D, up from 43.5%.
- Supporting R&D activities lose eligibility. This is the change everyone is underestimating, and it can be a material part of many claims. As an example, for software, hardware, biotech, medtech, advanced manufacturing and anyone running trials, integration work or process development around their core IP, this can be a material cut to your claimable base.
- Refundability is now restricted to companies under 10 years old. The exposure draft confirms that 10 years runs from when your company started trading, not from your first R&D claim. If you are past it and still loss-making, you keep the higher offset rate but you cannot get cash back. You carry losses forward instead.
- Refundable offset turnover threshold lifts from $20m to $50m. More growing companies stay on the refundable side of the regime for longer. This is the single biggest cash-flow positive in the package for scaling startups.
- The intensity threshold for companies above $50m turnover drops from 2% to 1.5%. This makes it easier for larger firms doing meaningful R&D to access the higher rate.
- The expenditure cap lifts from $150m to $200m. Useful for a very small number of very large R&D spenders. Most of you can ignore this one.
Two timing notes. The reforms apply from 1 July 2028, which means FY29 onwards. Income years ending 30 June 2027 and 30 June 2028 will run under existing rules, but with heightened integrity and anti-fraud scrutiny on claims. Make sure your documentation is in order – the ATO and AusIndustry will be looking harder during the transition.
What this means for founders right now
You have roughly 25 months until the new rules apply. Here is how we would use that time.
1. Audit your supporting R&D exposure
Pull your last two RDTI claims. What percentage of total eligible expenditure sat in supporting activities versus core experimental activities? That ratio tells you exactly how exposed you are to the eligibility change. If supporting activities are above 30% of your claim, you have real work to do on how you scope and document R&D going forward.
2. Reframe what counts as core
In a lot of cases, what may have historically been documented as supporting is actually core experimental work that has been described loosely. Tighter framing, better contemporaneous evidence and clearer hypothesis-experiment-result documentation can move expenditure into the core bucket where it belongs. Start this now, not in FY29.
3. Stack the new loss refundability measure with R&D
From 1 July 2028, loss-making companies under $10m turnover in their first two years can convert losses into a refundable offset, capped at FBT and PAYG withholding on Australian wages. Combined with R&D refundability at 48%, the stack delivers materially more cash per loss year than R&D alone – with the government effectively co-funding more than half of a typical early-stage loss year. We have written a separate piece on how loss carry-back and loss refundability work in practice with a worked example of the R&D + loss refundability stack.
The bigger picture
The government’s stated logic is “better targeting and simplifying” the program toward high-impact innovation. The honest read is that they’re taking dollars out of supporting activities, recycling some into a higher core rate, and using the savings to fund the loss carry-back scheme and the permanent instant asset write-off.
This is general information, not advice. The rules above are technical and the right move depends on your specific situation.
Book a call with Standard Ledger to talk through what these changes mean for your startup.
