Submission on the Better targeting the Research and Development Tax Incentive – exposure draft

ATSE welcomes the Government’s ambition, announced in the 2026-27 Federal Budget, to reform the R&DTI to stimulate additional business investment in R&D. Longstanding issues with the R&DTI include insufficient targeting and administrative complexity, with concerns that some supported activities would have occurred regardless of the incentive. The proposed changes go some way to rectifying these issues, but some elements of the reforms risk undermining the objective of stimulating the innovation ecosystem.

ATSE makes the following recommendations to improve the R&DTI reforms:

Recommendation 1: Target the refundability limit more precisely: measure the ten-year period from first R&DTI registration only, extend the fifteen-year period to other long-horizon R&D, and remove the requirement for therapeutic goods entities to register within their first ten years.

Recommendation 2: Create a simplified set of administrative requirements for start-ups and small companies, as recommended by the Ambitious Australia report, in the next stage of the Government's response.

Recommendation 3: Create an incentive for collaborative R&D undertaken with universities, research institutes and government agencies, such as a collaboration premium, in the next stage of reforms.

Recommendation 4: Retain eligibility for activities integral to R&D, such as prototyping, trial manufacture and clinical trial supply, at least for companies with aggregated turnover below $50 million, and issue guidance on the boundary of eligible R&D activities before the reforms commence.

Recommendation 5: Publish annual program data on the reforms by company age, size and sector, and commission an independent review of the R&DTI and Innovative Business CGT Concession reforms within three years of commencement.