As of 1 July 2025, R&D activities related to gambling and tobacco are no longer eligible for the R&D Tax Incentive. The change is now law, having received Royal Assent as part of amendments to the Income Tax Assessment Act 1997, passed through the Treasury Laws Amendment (Delivering an Efficient and Trusted Tax System) Bill 2026. It applies broadly, including to activities that might not seem obviously “gambling” or “tobacco” related at first glance.
If your business touches either sector, here’s what you need to know.
What’s excluded?
Two categories of activity are now carved out of both core and supporting R&D:
- Activities related to gambling services, gambling, and gambling-like practices, covering online and land-based gambling, wagering platforms, and gaming machine technology.
- Activities related to tobacco, nicotine products, and vaping goods, including products manufactured using tobacco or tobacco extract.
The government’s rationale is straightforward: public funds shouldn’t be subsidising innovation that risks worsening addiction or other harms. But the practical scope is what businesses need to pay attention to.
The definitions are broader than the label on your industry
This isn’t limited to gambling operators and tobacco manufacturers. The exclusion applies based on the nature and purpose of the R&D activity, not the type of business conducting it. That means it can reach into adjacent and enabling sectors, including:
- Software and platform developers building tools used by gambling or tobacco businesses
- Data analytics and marketing platforms
- Technology providers whose product could plausibly be applied in either sector, even if that’s not their primary market
If your R&D could be characterised as supporting a gambling or nicotine-related outcome, it’s worth a closer look, even if your company doesn’t sit in either industry on paper.
The harm minimisation carve-out
There’s one important exception. Activities conducted for the sole purpose of harm minimisation remain eligible. For tobacco and nicotine, that means R&D solely aimed at the therapeutic use of therapeutic goods, or at stopping the ingestion or transfer of nicotine into the body. For gambling, it means R&D solely aimed at minimising harm to a person or the broader community.
The keyword is “sole.” Activities that also support engagement, participation, or monetisation outcomes, even partly, aren’t intended to qualify. If your project has a dual purpose, harm reduction and product improvement, for example, that mixed intent is likely to put it outside the carve-out.
What this means for supporting activities
The exclusion doesn’t stop at core R&D. Supporting activities connected to gambling or tobacco can’t qualify indirectly either, unless they meet the same strict harm-minimisation test. This closes off any argument that an otherwise-excluded activity could sneak back into eligibility by being characterised as merely “supporting” a broader project.
What to do now
If you’ve conducted R&D related to gambling, tobacco, nicotine, or vaping since 1 July 2025, it’s worth reviewing:
- Whether any of your registered or planned activities fall within the new exclusions
- Whether any activities you’re treating as eligible under the harm minimisation carve-out can genuinely demonstrate sole purpose
- Whether any existing AusIndustry findings you’re relying on for these activities remain valid, since prior findings in this space can’t automatically be relied upon going forward
Getting this wrong isn’t a minor issue. Misclassifying an excluded activity as eligible core or supporting R&D creates real compliance risk at both the registration and ATO offset claim stages.
If you’re unsure whether your activities are caught by these changes, it’s worth a conversation with us before your next registration is lodged.