Changes to the Australian RDTI

The Six Changes to the Australian RDTI – All proposed to take effect from 1 July 2028:

• The headline uplift: higher benefit rates for core experimental R&D – The offset rate for core experimental R&D activities increases by approximately 4.5 percentage points across both the refundable and non-refundable tiers. The intensity threshold that unlocks the higher-tier premium drops from 2 per cent to 1.5 per cent, meaning more businesses will access the higher rate.
• The key trade-off: supporting R&D activities removed from eligibility – From 1 July 2028, supporting R&D activities will no longer attract the R&D offset. The Government has confirmed this is an abolition of the supporting activity category, not a re-characterisation.
• “50 is the new 20” – the refundable R&D offset threshold – The aggregated turnover threshold for the refundable R&D offset rises from $20 million to $50 million.
• The 10-year age cap on refundability: a genuine concern – Refundability is now conditional not just on turnover but on the age of the business. Only entities operating for fewer than 10 years will be eligible for the refundable R&D offset.
• The R&D expenditure cap raised to $200 million – The annual cap on R&D expenditure eligible for the offset rises from $150 million to $200 million.
• Minimum R&D expenditure claim floor raised to $50,000 – the minimum claim threshold rises from $20,000 to $50,000.

Instant asset write-off (IAWO)

• The IAWO has finally been made a permanent feature of the tax rules.
• Assets purchased for under $20,000 by businesses with turnover under $10 million are eligible for an instant tax deduction.
• Effective from 1 July 2026.

Loss carry-back

• These rules were a feature of the COVID years and are going to be made permanent for FY27 onwards for businesses with turnover under $1 billion.
• Losses incurred can be ‘carried back’ up to two years to get tax paid in those earlier years refunded.
• Effective from 1 July 2026.

Discretionary trust minimum tax rate

• From 1 July 2028, a minimum 30% tax will apply to distributions from discretionary trusts.
• Limited exception apply (e.g. fixed and widely held trusts, primary producers, deceased estates, super funds).
• The tax will be payable by the trustee and claimable as a credit by the beneficiary. It’s unclear whether company beneficiaries will be able to claim the tax credit, which could result in double taxation for those using beneficiary companies.
• There’ll be rollover relief available for three years from 1 July 2027 to restructure from a trust into a company or fixed trust.

Electric vehicles

• FBT concessions will be progressively wound back from April 2027.
• From April 2027, the FBT concession will be limited to vehicles costing less than $75,000 with EVs over that threshold instead receiving a 25% discount on the FBT bill.
• From April 2029, no more full exemption with eligible vehicles only receiving a 25% FBT bill discount.

Working Australians Tax Offset (WATO)

• A new tax offset for all working Australians of $250 a year for FY28 onwards. Not applicable to investment/pension earners, just wage earners.
• Not a tax cut exactly, but the Treasurer has said the door is open to actual tax cuts to address bracket creep, and this would be taken to the next election.

Instant tax deduction

• An “instant” tax deduction of $1,000 for work-related expenses.
• If you have more than $1,000, you can claim them in the ordinary way (i.e. keep receipts, make a claim).

Electric vehicles

• FBT concessions will be progressively wound back from April 2027.
• From April 2027, the FBT concession will be limited to vehicles costing less than $75,000 with EVs over that threshold instead receiving a 25% discount on the FBT bill.
• From April 2029, no more full exemption with eligible vehicles only receiving a 25% FBT bill discount.

Discretionary trust minimum tax rate

• From 1 July 2028, a minimum 30% tax will apply to distributions from discretionary trusts.
• Limited exception apply (e.g. fixed and widely held trusts, primary producers, deceased estates, super funds).
• The tax will be payable by the trustee and claimable as a credit by the beneficiary. It’s unclear whether company beneficiaries will be able to claim the tax credit which could result in double taxation for those using beneficiary companies.
• There’ll be rollover relief available for three years from 1 July 2027 to restructure from a trust into a company or fixed trust.

CGT discount

• From 1 July 2027 the CGT discount will be scrapped and replaced with the (original) indexation method of calculating capital gains.
• The indexation method provides an uplift in the cost base of the asset based on inflation, but nothing more (i.e. far less generous than the current ‘proceeds less cost base times 50%’ calculation for assets held more than 12 months).
• Important to note that it will only apply to gains accruing from 1 July 2027. This will mean asset holders will want to get valuations done next July – nothing to do now, but something to keep in mind.
• There will be an exception for residential property investors who buy new builds.
• The existing CGT exemption for pre-1985 assets will also be gone from 1 July 2027 with those assets being subject to CGT based on the value accrued from 1 July 2027.
• Super funds will continue to receive the existing 1/3 CGT discount for assets held for more than 12 months.

Capital gains minimum tax rate

• Most capital gains will be subject to a minimum 30% tax rate.
• Applies to individuals, trusts, and partnerships.
• There are limited exceptions to this which include super funds.

Negative gearing

• Changes will impact investors purchasing existing residential property (i.e. not new builds) from 7:30pm yesterday (12 May 2026) (i.e. the cut off has passed).
• From 1 July 2027, negative gearing on investment properties that are existing properties (i.e. not new builds) will be scrapped although we note you can still claim the costs of the property against the property income with any unused losses being carried forward and can be used to offset any eventual capital gain on the property.
• Investors who held residential property prior to 7:30pm yesterday (12 May 2026) will not be impacted by the change to negative gearing.
• Negative gearing will continue to be available for investors buying new builds.