Better targeting the R&D Tax Incentive: BDO submission

BDO has made a submission to Treasury in response to the exposure draft legislation and explanatory materials for the Treasury Laws Amendment (Tax Reform No. 5) Bill 2026: Better Targeting the Research and Development Tax Incentive.

The Research and Development Tax Incentive, or RDTI, is an important mechanism for encouraging businesses to invest in new technologies, products and processes. BDO supports the Government’s objectives of simplifying the program, strengthening its integrity and maintaining its fiscal sustainability.

BDO also supports several elements of the proposed reforms, including increased offset rates and expenditure thresholds, a higher $50 million aggregated turnover threshold for the refundable offset and a lower R&D intensity threshold.

However, our submission raises significant concerns about the proposed 10-year enterprise-age limit and the removal of supporting R&D activities without a complete replacement definition. As drafted, these measures could create cliff effects, uncertainty and additional complexity for businesses undertaking R&D in Australia.

BDO’s key recommendations

• Remove the enterprise-age test: Do not proceed with the proposed 10-year limit, as refundability should reflect the R&D lifecycle rather than the age or ownership history of the business
• Introduce targeted continuity rules: Replace the connected-entity and affiliate test with rules that transfer an entity’s history only where substantially the same business or R&D program continues
• Adopt a complete definition of R&D: Use a single definition covering the full systematic progression required to resolve a scientific or technical unknown and generate new knowledge
• Preserve industry neutrality: If a time limit is retained, apply a consistent 15-year refundable period across all industries rather than providing an industry-specific extension
• Clarify regulatory responsibility: Assign technical R&D activity eligibility to IISA or DISR, while the ATO remains responsible for expenditure, nexus, apportionment and the tax offset.

Download Submission

Contact your local BDO adviser from our R&D and Government Incentives team if you would like further information.