25/08/2026
Government Proposes Largest R&D Tax Boost in Years
Base rate entities could see refundable offsets climb from 43.5% to 48% under the 2026-27 Federal Budget
Australian businesses running genuine research and development are set for a windfall. The 2026-27 Federal Budget proposes lifting the refundable R&D Tax Incentive offset for base rate entities from 43.5% to 48%, the largest single increase to the scheme in years.
Under the plan, the premium paid on top of a company's tax rate rises from 18.5% to 23%. For a base rate entity paying 25% corporate tax, that takes the total refundable offset to 48%. Non-base rate entities, which pay 30% tax, would see their offset rise to 53%.
The size of the gain depends on how much a company spends and where that spend sits. A 4.5 percentage point rise in the headline rate can translate to a 25% to 50% increase in the actual dollar value a business receives back.
The change targets core R&D activity: work built on genuine technical uncertainty, where the outcome isn't known going in. Businesses running deep, experimental research stand to gain the most, particularly in biotech, medtech, and advanced manufacturing, where cash flow during the testing phase often decides whether a project moves forward.
For entrepreneurs and startups weighing whether to keep research onshore or take it offshore, the proposed rate makes Australia a stronger place to run that work. For established SMEs already claiming the incentive, it means a bigger refund on the same spend, without any change to how the program operates day to day.
The measure isn't law. It's a proposal in the current Federal Budget, with a start date set for income years from 1 July 2028. That gives businesses close to two years to plan their research programs around the higher rate rather than react to it once it lands.
For a country that has spent years being told to spend more on innovation, this is the government putting money behind the ask. Businesses running real experimentation now have a clear incentive, and a clear deadline, to plan for.
