What the 2026–27 Federal Budget changed for the R&D Tax Incentive (and why it starts 1 July 2028)

What the Budget announced

The reforms respond to the Strategic Examination of Research and Development and its final report, Ambitious Australia. The stated objective is to "better incentivise core R&D that benefits the broader economy." (Budget 2026–27 — Tax reform)

Sources: Budget 2026–27 — Tax reform; EY — Federal Budget 2026–27: R&D Tax Incentive changes. EY's analysis characterises the core-R&D increase as roughly a +4.5 percentage-point uplift to the premium.

The headline trade-off: more generous treatment of core, experimental R&D, paid for by removing supporting-activity expenditure and a higher entry bar. The reform sharpens the line between "core" and "supporting" R&D rather than widening the net.

When it takes effect (and the big caveat)

The measures are proposed to apply to income years starting on or after 1 July 2028. As of this update they are announced, not legislated — EY notes they remain "unlegislated and are expected to apply from 1 July 2028, subject to the passage of legislation."

What that means in practice:

• The current rules still apply for FY2025–26, FY2026–27 and FY2027–28.
• Detail can change as draft legislation and consultation proceed. Treat the figures above as the announced design, not settled law.
• There is a multi-year runway to get documentation practices ready for a regime that weights core experimental activity more heavily.

Where these changes came from

The reforms trace back to the Strategic Examination of Research and Development (SERD) — an independent review of Australia's R&D system. Its final report, Ambitious Australia, was released on 17 March 2026 and made 20 headline recommendations, including redesigning the R&D Tax Incentive from a single-rate scheme toward a system that more sharply targets core, experimental R&D by high-potential firms. (Department of Industry, Science and Resources — R&D Tax Incentive)

The Budget adopted that direction: reward genuine experimental R&D, stop subsidising expenditure that only supports it.

What this means for how you document R&D

The reform doesn't change the fundamental requirement to substantiate a claim — it raises the stakes on how activities are characterised. Two shifts matter most for record-keeping:

1. The core-vs-supporting line becomes a funding line. Once "supporting" expenditure stops being eligible, the question of whether an activity is a core experimental activity carries more weight. That distinction has always been a documentation question — it just becomes a more consequential one.

2. A higher reward for core R&D invites closer scrutiny of it. Regimes that pay more for a category tend to attract more examination of that category. The evidence that an activity was genuine experimental R&D — the hypothesis, the experiments, the results, dated as they happened — is what holds up under review.

Neither shift is something to act on in 2028. Both are reasons to keep contemporaneous records — records made as the work happens — now, so the characterisation of every activity is defensible whichever way the rules settle. The ATO has consistently treated records made at the time as the strongest evidence under examination.

Dossio is infrastructure for exactly this: capturing R&D evidence in structured, dated, audit-ready form as the work happens — with the core-vs-supporting characterisation built into the workflow, and R&D tax experts providing oversight and governance.

Sources

• Australian Government — Budget 2026–27: Tax reform
• EY — Federal Budget 2026–27: R&D Tax Incentive changes and what they mean
• ATO — Tax Reform: better targeting the R&D Tax Incentive
• Department of Industry, Science and Resources — R&D Tax Incentive