Budget 2026: the Proposed $50,000 R&D Threshold, Explained

What was announced

Three things are known, and they should be kept separate from each other:

1. What the Government said. The 2026-27 Budget announcement describes supporting “quality outcomes for R&D projects under $50,000 by requiring businesses to work with recognised research organisations”.
2. When it starts. business.gov.au states the changes will start from 1 July 2028, applying to income years beginning on or after that date.
3. What is still undefined. “Recognised research organisation” has not been defined by the Government, and the announcement does not say whether it means the existing register of Research Service Providers, a new category, or something broader. Ignition Research's current status is a registered Research Service Provider, RSP000047, listed on the business.gov.au register. We will not tell you those two things are the same until the Government says so.

Status: this is an announced proposal, not enacted law. Detail and timing can change as it moves through the legislative process. Do not treat the figures below as current rules — confirm the law in force with the Australian Government or a registered tax agent.

The seven announced changes, in full

The $50,000 threshold is the change that matters most to small claimants, but it is one of seven. The ATO's own description of the measure is the most specific published account, and it groups them under three intentions. All seven take effect from 1 July 2028 and apply to all R&D entities. The ATO states plainly that the measure is not yet law.

1. Replace the offset on supporting activities with a higher rate on core activities. Eligibility of supporting R&D activities would be removed from the offset; expenditure on core R&D activities would attract a 4.5 percentage point increase in the offset rate; and the intensity premium threshold would fall from 2% to 1.5% of expenditure.
2. Focus the refundable offset on high-potential firms in need of cashflow support. Access to the refundable offset would be restricted to a company's first 10 years of operation; the minimum expenditure to be eligible in a year would rise from $20,000 to $50,000; and the turnover threshold for the refundable offset would rise from $20 million to $50 million.
3. Keep large-scale R&D in Australia. The maximum expenditure threshold would rise from $150 million to $200 million.

Two of these cut in opposite directions for the same company. A young, loss-making company under the turnover threshold gains from the higher core rate and the wider turnover eligibility, and loses whatever it currently claims on supporting activities. A company past its first decade would lose access to the refundable offset entirely. Which effect dominates is a question about a specific claim, not a general one.

Current law vs the announced proposal

Figures and dates reflect what was announced and may change. The rate movements above are stated the way the ATO states them — as changes to the existing rate structure, not as a finished percentage. Nothing here is a rate you can apply to a claim: the measure is not law, and the rate that applies to any income year is the one in force for that year.

What this may mean for small R&D budgets

This section is our reading of the announcement, not a statement of the rules. Under the current law, where total notional deductions fall below $20,000, the offset base is already limited to spend with a non-associate registered RSP (plus eligible CRC contributions). A higher threshold would make that below-threshold mechanism relevant to far more projects.

Whether the existing RSP register is what the Government means by “recognised research organisations” is not something we can tell you, because it has not been said. What we can say is that the current mechanism is documented and available now. See claiming R&D under the threshold and RSP vs R&D tax consultant.

What small R&D claimants should do now

• Keep claiming under current rules. The $20,000 threshold (and the below-threshold base that goes with it) applies until any change takes effect.
• Plan the RSP pathway. If your R&D budget is modest, routing eligible work through a registered RSP positions you for both the current rules and the proposed reform.
• Confirm with a registered tax agent. Eligibility is self-assessed and the policy is not yet law — get your specific position confirmed.

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