Proposed 2026 reforms to the R&D Tax Incentive to watch

The Australian Government has announced a package of reforms to the Research and Development Tax Incentive (R&DTI) that would take effect for income years starting on or after 1 July 2025, which for most businesses means the 2026 financial year. These changes are proposed, not yet law, and could be refined as legislation is introduced. This step-by-step guide walks you through the announced measures, how they may affect your R&D claim, and the practical steps you can take now to prepare.

This article is general information only; it is not tax, financial, or legal advice. Every R&D claim turns on unique facts, and only a registered tax agent can review your circumstances and lodge a claim. Confirm all figures, thresholds, and program rules with the ATO, AusIndustry, and the Department of Industry, Science and Resources before you rely on them.

Prerequisites for staying on top of the reforms

Before you start tracking the proposed changes, make sure you have these basics in place:

• A working understanding of the current R&D Tax Incentive. Our plain‑English guide explains what it is, who may be eligible, and how registration works.
• Up‑to‑date accounting records. If your books live in Xero, MYOB, or QuickBooks, GrantsMAX can read that data read‑only and start building an evidence‑backed pack.
• Engagement with a registered tax agent or accountant who is authorised to review and lodge R&D claims. Through the Accountant Review & Lodge Workflow, you and your accountant share a workspace where the accountant stays in control at every step.
• A habit of checking official announcements from the ATO, AusIndustry, and the Department of Industry, Science and Resources. We will point you to the key pages as we go.

With those foundations in place, let's step through the proposed reforms.

Step 1: Familiarise yourself with the current R&D Tax Incentive framework

Before you can assess what the proposed changes mean, you need a clear picture of how the incentive works today. The R&DTI is Australia's principal mechanism for encouraging business R&D. It offers two offset rates, depending on your aggregated turnover:

• Companies with aggregated turnover below $20 million may access a refundable tax offset, currently 43.5% (based on the company tax rate plus a premium). A refundable offset means you may receive a cash refund if the offset exceeds your tax liability.
• Companies with aggregated turnover of $20 million or more may access a non‑refundable tax offset, currently 38.5%, which can reduce your tax payable to zero but cannot generate a cash refund.

To claim, you must register eligible R&D activities with AusIndustry within 10 months of the end of the income year. The ATO then assesses the claim when you lodge your company tax return. You must keep contemporaneous records that substantiate each core and supporting R&D activity, covering the hypothesis, systematic progression of work, and expenditure details.

The distinction between refundable and non‑refundable is critical for cash‑flow planning, and it is the biggest target of the proposed 2026 reform. If you are uncertain whether your activities qualify, start with an independent assessment. The Eligibility Assessment & Risk Flags feature in GrantsMAX flags what a reviewer would scrutinise and helps you firm up evidence before your accountant reviews the claim.

Step 2: Understand the announced 2026 to 27 reform measures

The centrepiece of the 2026 reform package, as detailed on the ATO's dedicated R&D Tax Incentive reforms page, is the proposal to lift the refundable R&D tax offset turnover threshold from $20 million to $50 million. Under the proposed rules, companies with aggregated turnover below $50 million could access the refundable offset for R&D expenditure incurred in income years starting on or after 1 July 2025. This change would move a large cohort of mid‑market businesses into the refundable category, potentially improving their cash flow and R&D investment capacity.

The government has also signalled additional measures, including a premium R&D tax offset for expenditure on R&D activities conducted in collaboration with an Australian university or a publicly funded research organisation. The specifics, including the premium rate and the scope of eligible collaborations, will be confirmed when legislation is introduced.

The ATO page emphasises that these measures are proposed and subject to legislative change. No business should assume the new rules will apply exactly as announced. We strongly recommend you track the ATO and AusIndustry websites for updates and discuss timing with your registered tax agent.

Pro tip: Even if the $50 million threshold becomes law, your company's refundable status will still depend on the aggregated turnover calculation rules. Speak with your accountant now about how the rules apply to your group structure so you are not caught out by related‑entity aggregations.

Step 3: Determine if the proposed changes may affect your business

Now that you know the headline measures, assess where your business sits. Ask yourself these questions:

What is your current aggregated turnover?

• If it is well below $20 million today, the proposed threshold lift may not change your offset type, though it could affect the competitive landscape if more businesses become eligible for refundable offsets.
• If your turnover is between $20 million and $50 million, you stand to gain the most. You could switch from a non‑refundable to a refundable offset, which may unlock significant cash refunds.
• If your turnover is above $50 million, the offset remains non‑refundable, but you could still benefit from any premium collaboration offset if your business partners with a university or research organisation.

Do you already collaborate with research institutions?

If your R&D involves a university, CSIRO, or a similar body, start gathering records of the collaboration. The proposed premium offset may reward documented partnerships, so having clear agreements, invoices, and milestone reports will be essential. GrantsMAX's Audit‑Ready Evidence Trail ties each activity and cost line to source documents, which could be invaluable when substantiating collaborative expenditure.

Are you a first‑time claimant or still exploring the R&DTI?

The reform may open the door for mid‑market companies that previously assumed the incentive did not deliver cash benefits. For anyone new to the process, GrantsMAX for first‑time claimants shows what you may be eligible for and prepares a complete pack for your accountant to review.

Warning: Being within a turnover range does not guarantee eligibility. R&D activities must still meet the legislative definitions of core or supporting R&D activities, and the claim must be lodged by a registered tax agent. GrantsMAX does not lodge or file claims; it prepares an evidence‑backed pack that your accountant reviews and lodges.

Step 4: Audit your current R&D activities and record‑keeping

One of the most common reasons R&D claims are adjusted or rejected is weak contemporaneous documentation. The proposed reforms do not change the substantiation requirements, but a larger refundable offset pool is likely to attract closer scrutiny from the regulators. Now is the time to tighten your evidence.

Run through this checklist for each R&D activity you intend to claim:

1. Hypothesis and purpose. Is there a written statement of the scientific or technological uncertainty you were trying to resolve? Even if the outcome was unsuccessful, the documentation must show a genuine attempt to remove that uncertainty through a systematic progression of work.
2. Activity descriptions. Can you separate core R&D activities from supporting activities? For software development, for instance, are you clearly distinguishing experimental development from routine debugging or maintenance?
3. Expenditure linkage. Are staff timesheets, contractor invoices, and consumable purchases clearly attributable to the R&D activities? Can you demonstrate that the costs are on‑budget and directly related?
4. Meeting the 'at‑risk' test. For activities conducted under a contract, do you retain the financial risk? The ATO pays close attention to who bears the risk, especially in arrangements with related parties.
5. Collaboration records. If you are positioning for the proposed premium offset, do you have signed collaboration agreements, evidence of shared decision‑making, and a clear delineation of who conducted which part of the R&D?

For technology companies where the narrative is often the weakest link, GrantsMAX for technology companies drafts both the technical narratives and cost structures from your data so your accountant reviews a complete, defensible pack. Similarly, manufacturers who invest in process improvement and new product development can pull those activities into a substantiated claim their accountant can lodge.

Step 5: Speak with your registered tax agent early

The R&D Tax Incentive reform timeline gives you a window to plan before the proposed 2026 start date. Bring your accountant into the conversation now. Together you can:

• Model your turnover. Confirm your aggregated turnover under the current grouping rules and project where it is likely to land for the 2026 income year.
• Map your R&D spend. Identify whether shifting to a refundable offset could meaningfully improve your cash position, and if so, whether it justifies accelerating or deferring certain projects.
• Assess collaboration opportunities. If your accountant believes the premium collaboration offset will be available, discuss which partnerships might qualify and what additional records you need to start keeping.
• Prepare for the transition year. If your turnover crosses the old or new threshold partway through the year, delicate apportionment rules may apply. Your accountant can help you structure records to handle a mixed‑offset period.

Many accounting firms already use GrantsMAX to white‑label the preparation work across their client base. The GrantsMAX for accounting and bookkeeping firms page shows how firms can discover, prepare, and review grant and R&D packs efficiently while staying in control of all lodgements. The Annual Refresh & Accountant Channel ensures each claim is refreshed with the latest data every year, which is particularly useful as legislative settings shift.

Warning: Only a registered tax agent can lodge an R&D claim with the ATO. Never accept a service that claims to lodge on your behalf without an agent involved. With GrantsMAX, the accountant always controls the final review and lodgement.

Step 6: Monitor official AusIndustry and ATO communications

Government reform processes can move in unexpected directions. The measures described on the ATO reforms page will not be final until Parliament passes legislation, and the details may change through consultation with industry and professional bodies.

Set up a recurring calendar reminder to check these sources every month:

• ATO-Research and Development Tax Incentive reforms at the ATO website. The ATO updates this page with the status of the legislation and practical guidance for companies and tax professionals.
• AusIndustry and business.gov.au-AusIndustry is the agency that registers R&D activities. Look for announcement pages, fact sheets, and frequently asked questions on the business.gov.au grants section. The Department of Industry, Science and Resources also publishes program updates.
• Industry Innovation and Science Australia-As the advisory board for innovation policy, IISA may release submissions and analysis that offer early insights into how the rules are shaping up.
• Austrade-If your R&D has an export dimension and you are also considering the Export Market Development Grant (EMDG), Austrade updates are essential.

When a draft bill is introduced, it will be published on the Parliament of Australia website. Your accountant can help you interpret how the legislative text applies to your business. In the meantime, treat every media report and third‑party article as speculation unless it references an official source.

Step 7: Prepare your evidence‑backed application pack now

You do not need to wait for the reforms to become law to start building a strong claim. The fundamentals of R&D eligibility and evidence are unlikely to change, and a well‑prepared pack will stand up regardless of when you lodge. Here is a phased approach you can begin today:

1. Connect your data. GrantsMAX reads your Xero, MYOB, QuickBooks, Microsoft 365, or Google Workspace data read‑only. It automatically surfaces potential R&D activities and costs you may not realise are eligible.
2. Flag your activities. Use the Eligibility Assessment & Risk Flags to test each activity against the legislative criteria. The tool highlights where a reviewer would look hardest, so you can strengthen those areas.
3. Draft the narratives. For each core and supporting activity, GrantsMAX produces a draft description and cost allocation, ready for your accountant to refine. Founders and CFOs who previously found the narrative process overwhelming can now hand a near‑complete pack to their accountant.
4. Assemble the evidence trail. As you go, GrantsMAX indexes emails, invoices, and timesheets against each line item, producing an audit‑ready evidence trail that your accountant can stand behind.
5. Hand off to your accountant. When you are ready, invite your accountant into the shared workspace. They review, adjust, and lodge the claim. You retain ownership of the claim throughout.

The earlier you start, the less pressure you will face as the legislative deadline approaches. For R&D‑active startups, GrantsMAX for R&D‑active startups shows how building a claim into your monthly rhythm turns a once‑a‑year scramble into a routine data check.

Summary and key takeaways

The proposed 2026 reforms to the R&D Tax Incentive are significant, but they are not law yet. Here is what to remember:

• Threshold lift: The refundable R&D tax offset turnover threshold is proposed to increase from $20 million to $50 million. Mid‑market businesses may become eligible for cash refunds.
• Premium collaboration offset: A higher offset rate for expenditure on R&D conducted with universities or public research organisations has been announced, but details are pending.
• Proposed, not enacted: All changes are subject to legislative passage. Verify the current state of play with the ATO and AusIndustry before making decisions.
• Evidence is still king: Strong contemporaneous documentation remains the foundation of a defensible claim, regardless of offset type.
• Work with a registered tax agent: Only a tax agent can lodge. GrantsMAX prepares the pack; your agent reviews, refines, and lodges.
• Prepare early: Start connecting your data, assessing eligibility, and building narratives now so you are ready when the new rules take effect.

If you want a clear, evidence‑backed view of what your business may be eligible for under the R&D Tax Incentive, and a head start on preparing for the proposed 2026 changes, join the GrantsMAX waitlist today. Your first claim, reviewed and lodged by your accountant, could be closer than you think.