R&D Tax Incentive 2026 – Rates, Deadlines and Key Changes
Everything you need to know about the R&D Tax Incentive for the 2025-26 income year – current offset rates, registration deadlines, recent legislative changes and what is on the horizon for Australian businesses.
The R&D Tax Incentive remains one of the most significant tax benefits available to Australian businesses conducting research and development. For the 2025-26 income year, the program continues to offer substantial refundable and non-refundable tax offsets – but recent legislative changes, tighter compliance measures and evolving AusIndustry enforcement practices mean businesses need to stay informed.
This guide provides a comprehensive overview of the R&D Tax Incentive for 2025-26, including current offset rates, key deadlines, recent legislative changes and what is on the horizon. Whether you are preparing your first claim or reviewing your ongoing R&D program, this is what you need to know.
Current Offset Rates for 2025-26
Companies With Turnover Under $20 Million
Eligible companies receive a 43.5% refundable tax offset on qualifying R&D expenditure. This is the company tax rate (25% for base rate entities) plus an 18.5% premium.
Because the offset is refundable, companies receive the benefit even if they are in a tax loss position. For a company spending $400,000 on eligible R&D, the refundable offset is $174,000 – paid as a cash refund by the ATO.
Companies With Turnover of $20 Million to $150 Million
Larger companies receive a non-refundable tax offset with a premium based on R&D intensity.
| R&D Intensity | Premium Above Company Tax Rate | Effective Offset Rate (25% CTR) |
|---|---|---|
| Up to 2% | 8.5% | 33.5% |
| Over 2% | 16.5% | 41.5% |
The $150 Million Expenditure Cap
There is a $150 million annual cap on eligible R&D expenditure per entity. Expenditure above this cap does not attract the R&D Tax Incentive offset, though it remains deductible at the standard company tax rate.
Key Deadlines for 2025-26
Missing a deadline can forfeit your entire claim. These are the dates every R&D claimant must know.
| Deadline | Date | Details |
|---|---|---|
| AusIndustry Registration | 30 April 2027 | 10 months after FY end. Absolute deadline – no extensions. |
| Tax Return Lodgement | 15 May 2027* | R&D schedule lodged with company tax return. *Standard tax agent lodgement date. |
| Record Retention | 30 June 2031 (minimum) | All R&D documentation retained for at least 5 years after the income year. |
Recent Legislative Changes
Gambling and Tobacco Exclusions
Activities associated with gambling services and tobacco products are now explicitly excluded from the R&D Tax Incentive. This applies to R&D where the predominant purpose is developing or improving gambling technologies, gaming machines or tobacco products. The exclusion reflects government policy to ensure public funding does not subsidise industries associated with social harm.
Enhanced Compliance Measures
The government has allocated additional funding to AusIndustry for compliance activities. This means more compliance reviews, more on-site visits and faster identification of claims that do not meet the legislative definition. The expanded program specifically targets claims from industries with historically high rates of non-compliance, including software, agriculture and food processing.
AusIndustry has also enhanced its data matching capabilities, cross-referencing registrations with ATO data, IP Australia patent filings and other government program applications.
Clinical Trials Notification Pathway
A streamlined notification pathway for clinical trials simplifies the registration process for pharmaceutical and medical device companies conducting TGA-regulated trials. This reduces administrative burden without changing the substantive eligibility requirements.
The $4 Million Refundable Offset Cap
The refundable portion of the R&D Tax Incentive offset is capped at $4 million per income year for companies with turnover under $20 million. Any offset exceeding $4 million converts to a non-refundable offset that can be carried forward.
How the Cap Works
If a company has $10 million in eligible R&D expenditure and qualifies for the 43.5% refundable offset, the total offset is $4,350,000. Only $4 million is refunded as cash. The remaining $350,000 becomes a non-refundable offset carried forward indefinitely.
Clawback Mechanisms
Clawback provisions apply when a company that received a refundable offset has its aggregated turnover reassessed above $20 million, or when R&D entities are sold, merged or restructured in ways that affect the original claim basis. The difference between refundable and non-refundable offset rates must be repaid.
R&D Intensity Premium Explained
The intensity premium determines the non-refundable offset rate for companies with turnover between $20 million and $150 million.
How R&D Intensity Is Calculated
R&D intensity is the ratio of eligible R&D expenditure to total deductible expenditure for the income year. Only qualifying R&D expenditure is included in the numerator.
Worked Example
| Scenario | Total Expenditure | R&D Expenditure | Intensity | Premium Tier |
|---|---|---|---|---|
| Company A | $50M | $1.5M | 3.0% | 16.5% (higher tier) |
| Company B | $50M | $0.8M | 1.6% | 8.5% (lower tier) |
The intensity threshold creates a step-change in the offset rate. Companies near the 2% threshold should review whether additional eligible activities could push them into the higher premium tier. This is one area where professional advice can identify significant additional value.
Comparison – 2025-26 vs Prior Year
| Parameter | 2024-25 | 2025-26 |
|---|---|---|
| Refundable offset rate (under $20M) | 43.5% | 43.5% |
| Non-refundable – intensity up to 2% | CTR + 8.5% | CTR + 8.5% |
| Non-refundable – intensity over 2% | CTR + 16.5% | CTR + 16.5% |
| Refundable offset cap | $4 million | $4 million |
| Expenditure cap | $150 million | $150 million |
| AusIndustry registration deadline | 30 April 2026 | 30 April 2027 |
| Company tax rate (base rate) | 25% | 25% |
| Compliance activity | Enhanced | Expanded further |
The offset rates and caps remain unchanged for 2025-26. The most significant developments are on the compliance side, with expanded review activity and enhanced data matching capabilities.
What Is Ahead
Potential Changes Under Consultation
The government has released consultation papers on simplifying the R&D Tax Incentive registration process, improving the interaction between the R&D Tax Incentive and other innovation programs, and reviewing the definition of core R&D activities to provide greater certainty for software companies. No legislative changes have been introduced from these consultations, but businesses should monitor developments.
Increasing Compliance Focus
The trend toward more active compliance enforcement is expected to continue. Businesses should anticipate that a higher proportion of claims will be reviewed and that assessors will have more data and analytical tools at their disposal. Building robust documentation practices now is an investment in future-proofing your claims.
Board of Innovation and Science Australia Reviews
The Board periodically reviews the R&D Tax Incentive and makes recommendations to government. The most recent review recommended maintaining current offset rates while continuing to strengthen compliance measures. Future reviews may recommend changes to the offset structure or eligibility criteria.
Frequently Asked Questions – R&D Tax Incentive 2026
What is the R&D Tax Incentive offset rate for 2025-26?
For companies with aggregated turnover under $20 million, the refundable offset rate is 43.5% – calculated as the 25% company tax rate plus an 18.5% premium. For companies with turnover between $20 million and $150 million, the non-refundable offset rate is the company tax rate plus either 8.5% or 16.5%, depending on R&D intensity. These rates are unchanged from 2024-25.
When is the AusIndustry registration deadline for FY2025-26?
The deadline is 30 April 2027 – 10 months after the end of the 2025-26 financial year. This deadline is absolute and AusIndustry does not grant extensions. Missing it forfeits the entire R&D Tax Incentive claim for that income year. Begin preparing your registration well before the deadline to allow time for gathering technical descriptions and internal review.
What is the $4 million refundable offset cap?
Companies with turnover under $20 million can receive a maximum cash refund of $4 million per income year from the R&D Tax Incentive. Any offset exceeding $4 million converts to a non-refundable offset that can be carried forward to reduce tax in future years. For most SMEs, the cap is not a constraint, as it equates to approximately $9.2 million in eligible R&D expenditure.
How does R&D intensity affect the offset rate?
R&D intensity is the ratio of eligible R&D expenditure to total deductible expenditure. For companies with turnover between $20 million and $150 million, an intensity above 2% triggers a higher premium of 16.5% above the company tax rate, compared to 8.5% for intensity at or below 2%. The higher tier can significantly increase the offset value and is worth optimising with professional advice.
What industries are excluded from the R&D Tax Incentive?
Activities predominantly related to gambling services and tobacco products are excluded. The exclusion covers R&D aimed at developing or improving gambling technologies, gaming machines and tobacco products. All other industries remain eligible, subject to the standard requirements of technical uncertainty, systematic experimentation and contemporaneous documentation.
Has the R&D Tax Incentive changed for 2025-26?
The core offset rates, caps and eligibility criteria are unchanged from 2024-25. The most significant developments are expanded compliance activity by AusIndustry, enhanced data matching capabilities and the continuation of gambling and tobacco exclusions introduced in prior years. Businesses should be aware of the increased compliance focus and ensure their documentation practices are robust.
Maximise Your 2025-26 R&D Claim
Prime Partners has a dedicated R&D Tax Incentive advisory practice that helps Australian businesses identify eligible activities, build robust documentation and prepare claims that withstand AusIndustry scrutiny.
Use our R&D Tax Incentive calculator to estimate your potential offset, then talk to our team about making it happen.
This guide is current as at March 2026 and is based on the Industry Research and Development Act 1986 and current AusIndustry guidance. It is general information only and does not constitute tax or legal advice. Contact your adviser for guidance specific to your circumstances.