Law Council of Australia

Business Law Section

Better targeting the Research and Development Tax Incentive

Submission Date: 28 September 2026

The Taxation Committee of the Business Law Section of the Law Council of Australia (Committee) provided a submission to Treasury in response to the exposure draft, Treasury Laws Amendment (Tax Reform No. 5) Bill 2026: Better targeting the Research and Development Tax Incentive, and the accompanying explanatory materials.

This submission addresses the proposed amendments to the research and development tax incentive (RDTI) contained in Schedule # to the exposure draft legislation (the schedule number has not yet been allocated in the exposure draft). The amendments would amend the Industry Research and Development Act 1986 and the Income Tax Assessment Act 1997.

This submission should be read together with the Law Council of Australia’s submission to Treasury of 17 July 2026, prepared with the contribution of the Taxation Committee of the Business Law Section and the Law Institute of Victoria, in relation to the proposed Innovative Business CGT Concession (Earlier Submission). This submission should also be read with the Law Council’s submission of 9 June 2026 to the Senate Standing Committees on Economics in relation to the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 and related measures.

The Earlier Submission and the Senate submission raised broader concerns about the design and implementation of the proposed capital gains tax reforms. Several of those concerns remain directly relevant to the RDTI reforms because the two regimes interact. Companies that claim the RDTI refundable offset are frequently the same companies whose founders, employees and investors are affected by the capital gains tax changes.

The Committee supports the policy objective of ensuring that Australia’s tax system encourages private-sector research and development expenditure. The RDTI is a significant component of Australia’s innovation infrastructure, and its reform should be approached with care.

However, the package of reforms, taken as a whole, contains elements that risk undermining the stated objective. Several measures intended to improve targeting will, in practice, reduce the availability and certainty of the incentive for genuine research and development activity, particularly in the technology sector. The Committee’s guiding principles include delivering certainty, predictability and fairness to those whose activities are governed by business law. The restrictive elements of this package are in tension with those principles.

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Last Updated on 01/10/2026

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