Ambitious Australia proposes targeted changes to improve impact, cash flow and competitiveness

19 March 2026

Australia’s Research and Development Tax Incentive (R&DTI) may be reshaped as part of a broader reform agenda following the conclusion of the independent Strategic Examination of R&D. The Federal Government will now carefully consider the final report—Ambitious Australia—and its recommendations and how it might respond.

The review’s central message in the final report is Australia needs a more coordinated, outcomes focused innovation system and that the R&DTI should be simplified and refocused to deliver greater impact, particularly for ambitious start-ups, growth-oriented SMEs and globally mobile R&D investment.

Proposed R&D Tax Incentive program changes

Changes proposed to apply across all claimants

The report recommends reforms to simplify administration and focus the program for greater impact, including:

• A move to a deemed rate for supporting R&D activities—a fixed R&D tax offset relative to the amount of core R&D expenditure claimed—intended to reduce ambiguity, streamline self-assessment and lower the record keeping burden.
• An increase in the minimum annual R&D project spend from $20,000 to $150,000, to limit access for subscale R&D and encourage more ambitious projects.
• Removal of clawback rules, so companies that succeed in public grant funding are not penalised through tax incentive adjustments, and grant funded outcomes are reinforced rather than diluted.

Premium startup stream with improved cash flow support

A distinct premium segment is proposed for high potential start-ups to simplify access and improve benefits. Key features include:

• Eligibility based on a 100-point style test using indicators of high growth potential such as qualified capital, selective accelerator participation, IP and university collaboration.
• A higher refundable tax offset benefit set at the corporate income tax rate plus 23.5% (currently 18.5%).
• Quarterly advanced payments based on the Business Activity Statement (BAS) to support cash flow in early years.
• A broader concept of eligible activity and expenditure for the startup stream, assessed by R&D projects and extended to include development and deployment, early commercialisation, and user testing and adoption research.
• Time limited access, generally three years, with a mechanism for deep tech businesses, such as pharmaceuticals, to reapply where longer development timeframes apply.

SME and scaleup stream linked to growth outcomes

The report proposes changes to better target refundable support toward businesses demonstrating genuine growth, including:

• Ongoing eligibility linked to outcomes such as revenue growth, using “on” and “off” ramp mechanisms to provide certainty while tightening targeting over time. For example, SMEs and scaleups receive the refundable offset for three years. Renewal for another three years requires average revenue growth of at least 5% above CPI over the prior three years. Missing this target for two consecutive years removes eligibility.
• An increase in the refundable turnover threshold from $20 million to $50 million.

Large firm settings to improve competitiveness and ecosystem contribution

For large firms and multinationals, the report proposes settings to improve Australia’s competitiveness for mobile R&D and to reward contributions to the broader innovation system, including:

• Removal of the $150 million eligible expenditure cap.
• Replacement of the tiered R&D intensity calculation with a simpler standard rate that is globally competitive.
• Making the cost of a first procurement contract with a new startup eligible, to encourage first customer adoption.
• Removing the R&D tax offset from franking credit calculations.
• Enhanced benefits linked to a points based “corporate citizen” test recognising activities such as research collaboration, procurement, investment, M&A, workforce upskilling, research infrastructure contribution and engagement of PhDs and researchers.

What this means for your businesses

These proposals point to a more segmented R&D Tax Incentive, with stronger support for high potential start-ups and scaling firms, and tighter access for businesses that remain subscale or low growth. The review indicates some businesses may become ineligible under a redesigned program, alongside separate support mechanisms to help lift R&D capability for those outside the incentive.

We are closely monitoring developments and can help you assess likely impacts on eligibility and claim value. Please reach out to your local PwC R&D Tax Incentive contact if you would like to discuss further.