| The Government’s controversial R&D Tax Incentive (RDTI) reforms have now reached Parliament. On Tuesday, the Treasury Laws Amendment (Tax Reform No. 4) Bill 2026 was introduced into Parliament. Disappointingly, despite significant industry feedback on the Exposure Draft, most of the substantive concerns raised during consultation appear to have been ignored. The Bill therefore retains the proposed removal of supporting R&D activities and a general 10-year limit on access to the refundable R&D tax offset, together with the other significant changes outlined in our previous MJA Update. A longer 15-year period is proposed for certain R&D entities undertaking eligible activities for the dominant purpose of generating new knowledge about therapeutic goods. The reforms are proposed to apply to income years commencing on or after 1 July 2028. A new Ministerial power The most significant change from the Exposure Draft is a new power allowing the Treasurer to prescribe additional kinds of activities as eligible R&D activities where they are considered “integral” to conducting otherwise eligible experimental R&D. The Treasurer must consult the Minister responsible for the Industry Research and Development Act 1986 before exercising this power. At first glance, this provides a potential mechanism for bringing some activities back within the RDTI following the proposed abolition of supporting R&D activities. However, it also creates significant uncertainty as to what expenditure will ultimately remain eligible. The Explanatory Memorandum states that an integral activity must be “necessary or essential”, rather than merely providing support, and makes clear that this is intended to be narrower than the existing supporting R&D activity concept. This leaves some fundamental questions unanswered. What activities will ultimately be prescribed? How narrowly will “integral” be interpreted? Which industries will benefit? And how much expenditure currently eligible as supporting R&D will simply fall outside the program? The answers will be critical to understanding the real impact of the reforms. Where to from here? The Bill must now make its way through Parliament, with the Government requiring support beyond its own numbers in the Senate, potentially including the Greens, to secure passage. There is therefore still an important opportunity for scrutiny of these reforms. It is hoped the Bill will be referred to the Senate Economics Legislation Committee for a thorough review, providing industry with a further opportunity to make more substantive and considered submissions on reforms that could fundamentally reshape the RDTI. MJA is undertaking a more detailed analysis of the Bill, including the practical implications of the new Ministerial power and the changes from the Exposure Draft, and will provide further commentary. Finally, the Bill also includes the Government’s proposed Innovative Business CGT Concession (IBCC). The IBCC would provide eligible investors with a 50% CGT discount on qualifying investments in innovative start-ups, subject to detailed eligibility requirements. Should you wish to discuss any of these matters further, please do not hesitate to contact one of our partners. |
Oct 27, 2026 3 minutes read
R&D reforms hit Parliament: new Ministerial power, but major concerns remain
by Craig Stewart
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