Which Industries Will Benefit Most from Australia’s New R&D Tax Incentive Changes?

Written By Luna Nguyen

Australia’s proposed reforms to the R&D Tax Incentive (R&DTI) - currently in draft and expected to apply from 1 July 2028 - will have a direct impact on how businesses plan, invest, and claim tax benefits from innovation.

This is no longer just about encouraging businesses to do research and development. It’s about determining which businesses can still access meaningful tax benefits - and which may see those benefits reduced or removed.

Backed by recommendations from the government-commissioned Ambitious Australia Report and Treasury’s draft legislation, the reforms aim to improve the effectiveness and targeting of tax incentives-which means not all businesses will benefit in the same way.

So the key question becomes:

Which industries are most likely to benefit under the new R&D tax rules-and what does this mean for your business?

A Shift in Focus: From Broad Access to Targeted Eligibility

Historically, the R&D Tax Incentive has been widely accessible, with many SMEs able to claim benefits across a broad range of activities.

Under the proposed changes, access becomes more selective.

In practical terms, businesses may face:

  • Higher minimum expenditure thresholds (starting from $50,000)

  • Limits on refundable tax offsets (generally within the first 10 years)

  • Greater scrutiny on whether activities qualify as genuine R&D

This means:

Not all R&D will deliver the same tax outcome as before.

For some businesses, this could directly affect:

  • cash flow (if refundable offsets are reduced)

  • effective tax position

  • return on investment in innovation

Industries Likely to Benefit Most

1. Technology, Software and AI

Technology companies are among the strongest beneficiaries under the new framework.

These businesses typically:

  • Continuously develop new products or platforms

  • Operate in scalable markets

  • Reinvest heavily into innovation

From a tax perspective:

  • R&D activities are easier to define, document, and justify

  • Projects are more likely to meet eligibility criteria

👉 This increases the likelihood of consistent and defensible R&D claims

2. Biotechnology and Medical Technology

The reforms explicitly recognise the unique nature of biotech and medtech sectors.

Under the draft rules:

  • These industries may access refundable offsets for up to 15 years

For businesses, this is significant:

  • Longer access to cash refunds from R&D activities

  • Better support for long development cycles

👉 This can materially improve cash flow during early and pre-revenue stages

3. Advanced Manufacturing

Manufacturers investing in:

  • Automation

  • Process innovation

  • New materials or production techniques

are also well-positioned.

From a business perspective:

  • These activities often involve clear experimentation and technical uncertainty

  • Easier to substantiate for R&D claims

👉 This supports both:

  • tax efficiency

  • and operational improvement

4. Clean Energy and Climate Technology

Businesses in:

  • Renewable energy

  • Energy storage

  • Sustainability technologies

are likely to remain competitive for R&D incentives.

For these businesses:

  • Innovation is typically core to operations

  • R&D spend is often significant and ongoing

👉 This increases the likelihood of:

  • meeting minimum thresholds

  • maintaining eligibility under stricter rules

5. Scale-ups and Growth-Stage Startups

The proposed rules favour businesses that are:

  • In earlier stages of operation

  • Actively reinvesting into R&D

  • Scaling their products or services

For these businesses:

  • Access to refundable tax offsets (cash benefits) is still available

  • R&D incentives remain a key funding mechanism

👉 This makes early-stage planning around R&D even more important

Who May Be Left Behind?

Some businesses may find it harder to access or benefit from the new rules:

  • SMEs conducting low-intensity or ad-hoc R&D

  • Businesses with projects below the $50,000 threshold

  • Companies relying on R&D claims without strong documentation

  • Mature businesses that no longer qualify for refundable offsets

In these cases:

R&D may still be claimable-but the tax benefit may be significantly reduced

What This Means for Your Business

Regardless of industry, the key takeaway is:

1. R&D needs to be better structured

  • Clearly defined objectives

  • Documented experimentation

  • Strong technical justification

2. Tax outcomes may change

  • Reduced cash refunds

  • Different timing of benefits

  • Greater compliance requirements

3. Planning becomes critical

Businesses should start considering:

  • Whether current R&D activities will still qualify

  • How changes affect cash flow and tax position

  • Whether R&D investment strategies need to be adjusted

Final Thoughts

Australia’s proposed R&D tax changes mark a shift in how tax incentives are applied to innovation.

It’s no longer just about doing R&D-it’s about whether your R&D will still deliver meaningful tax benefits.

For business owners, this is not just a compliance issue-it’s a strategic one.

Understanding how these changes apply to your business will be key to making informed decisions about investment, tax planning, and future growth.

Luna Nguyen
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