The RDTI at a glance
The RDTI is a federal program jointly administered by AusIndustry and the Australian Taxation Office. AusIndustry assesses whether claimed activities meet the legislative definition of R&D; the ATO administers the financial mechanics of the offset. Eligible companies with aggregated turnover under $20 million access a refundable tax offset of 43.5% of qualifying expenditure. Because the offset is refundable, pre-revenue biotechs receive the value as a cash payment rather than a deduction against tax payable. Larger companies access a non-refundable, intensity-tiered premium: the company tax rate plus 8.5% on R&D expenditure up to 2% of total expenses, and plus 16.5% on expenditure above that threshold. As explored later in this article, significant changes to the RDTI were proposed in the 2026–27 Australian Federal Budget, with potentially substantial implications for the life sciences sector and the broader innovation ecosystem.Why the R&D Tax Incentive matters for biotech
Biotech companies routinely spend 10+ years on preclinical and early clinical work before any commercial revenue is possible. The cash refund mechanism converts that science into recoverable cost, year after year, without diluting equity. For a seed-stage company spending $3–5 million annually on laboratory work, preclinical studies, and assay development, an RDTI claim can return more than a million dollars in a single cycle. That sum is often the difference between a twelve-month runway extension and an earlier bridge round, and when modelled into burn rates and investor projections, becomes one of the most predictable lines on the cashflow sheet.What qualifies as R&D?
Eligibility centres on whether the work involves genuine technical uncertainty that a competent professional could not resolve by drawing on existing knowledge. Most biotech R&D meets this test without much engineering. Protein expression optimisation, formulation stability testing, cell-based assay development, pharmacokinetic and pharmacodynamic studies, novel expression systems, and the generation of biological data that reveals previously unknown relationships all fall within scope. Routine quality control, standard manufacturing, and the application of validated methods do not.The distinction is not cost or complexity. It is whether the outcome could be known in advance, and whether systematic investigation was required to find out.
How outsourced research is treated
Most seed-to-Series B biotechs run their experimental programs across a network of external providers: contract research organisations, academic facilities, formulation specialists, and analytical labs. The RDTI permits outsourced work to be claimed, subject to one critical condition: the sponsoring company must control the scientific direction. If a CRO is executing experiments designed to test the company’s hypotheses and advance its technical objectives, the work is generally eligible. By contrast, expenditure on routine or standard commercial services that do not form part of eligible R&D activities is generally not claimable. Control and design determine eligibility; cost and complexity do not. For teams building out their provider network, the Directory of Providers offers a structured way to identify Australian CROs, academic facilities, and specialist labs across preclinical, analytical, and manufacturing capabilities.How international biotech accesses the RDTI
The RDTI is open to any company incorporated in Australia and tax resident here, including Australian subsidiaries of international biotech and pharma groups. Many offshore biotechs use this structure to access the refundable offset on Australian-based R&D programs, part of a broader policy effort to attract international R&D investment into Australia. For international teams, the strategic question is not whether the RDTI applies, but whether enough of the program can be credibly conducted in Australia to make the offset operationally significant. Steps have been taken to ensure that the system is not simply used through shell entities or low-substance cost centres. Australian subsidiaries are generally expected to demonstrate genuine economic substance in Australia, including meaningful operational activity, strategic control over local R&D, and real financial risk associated with the program. Transfer pricing arrangements must align with the commercial reality of the work being undertaken, and the Australian entity must receive appropriate compensation where activities are being conducted for offshore affiliates. Increasingly, regulators are also examining who controls the underlying R&D program, who benefits from the resulting intellectual property, and whether Australia retains a meaningful share of the economic value generated by the work conducted here.Overseas research and the Overseas Finding requirement
Many Australian biotech companies need to conduct work offshore for access to specialised animal models, clinical trial infrastructure, or capabilities not available domestically. The RDTI permits overseas expenditure to be claimed, but only when an Advance Overseas Finding has been obtained from AusIndustry. The application must show that the activity cannot be conducted solely in Australia and that overseas expenditure is less than the linked Australian spend. For international biotech teams evaluating whether to conduct work in Australia as part of an RDTI-eligible program, understanding what constitutes qualifying Australian activity, and what documentation supports it, is equally important. The Directory of Providers is a practical starting point for assessing what Australian capabilities exist before committing to a program design. The Platform also exports structured records of partner outreach and interactions, which may inform supporting evidence for RDTI claims.How the RDTI compares internationally
The international comparator that matters most is whether a credit is refundable in cash to a pre-revenue company. Most are not.
At 43.5% refundable, the RDTI is materially more supportive for pre-revenue biotech than the standard equivalents in either market, which is one structural reason international programs route work through Australia.
Documentation determines the outcome
RDTI claims can be reviewed years after the relevant work was performed. Companies need records sufficient to reconstruct the experimental program: plans, notebooks, protocols, provider reports, and financial records linking expenditure to specific projects. The absence of clear documentation, not the absence of genuine R&D, is what causes most claims to fail. Good records show that the work was hypothesis-driven, iterative, and genuinely exploratory.Clinical trials and the RDTI
Clinical trials sit in a nuanced position within the framework. Early-phase trials structured around safety, dosage, mechanism of action, or biological response generally qualify as core R&D activity when the underlying technical uncertainty is documented. Later-phase trials primarily aimed at commercial validation or regulatory approval occupy murkier territory. Embedded sub-studies, biomarker-driven experiments, pharmacodynamic investigations, and exploratory endpoints may still qualify where they are directed toward resolving scientific or technical uncertainty, but the supporting documentation must substantiate that experimental purpose clearly.What is proposed to change from 1 July 2028
The 2026–27 Federal Budget legislates the most significant RDTI reform in over a decade, with most measures commencing 1 July 2028.
Older sub-$50M firms receive the equivalent non-refundable offset. Below the new minimum floor, R&D activity must be undertaken with a registered Research Service Provider (RSP) or Cooperative Research Centre to qualify.
Overseas Finding rules were not amended.
These settings are Budget commitments subject to legislation, and operational details may shift before 1 July 2028.
What the changes mean for biotech
The reform package is, on balance, directionally favourable to young, R&D-intensive companies, the category many biotechs sit in. But the mechanics interact in ways that deserve closer reading than the headline numbers alone suggest. The 10-year refundability cliff is the change most likely to matter for biotech. Drug development from preclinical through regulatory approval averages around 15 years, with the bulk of R&D spend, pivotal trials and registrational work, concentrated in the back half of that arc, often after the new refundability cut-off. The 50M turnover threshold is welcome in isolation, though its reach is narrowed by the 10-year rule. With typical biotech development cycles running well beyond a decade, a meaningful share of companies will age out of refundability before their turnover reaches the band the new threshold was designed to support. The 200M maximum cap is a top-end measure. The R&D tax incentive transparency report 2022–23 data indicates the existing cap binds only a handful of the very largest claimants, namely Atlassian and Fortescue. Useful for them, but not the constraint that most R&D-active biotechs face. The 50K minimum threshold cuts off the smallest claims. About 5% of FY23 claimants spent below the proposed new floor. These are overwhelmingly early-stage companies in their first years, where a $10–20K refund can be the difference between reaching a milestone and not. Ultimately, the package increases the program’s headline value while tightening eligibility at the two ends most relevant to biotech: small claims at the earliest stages, and refundability for companies in development past year 10. Biotechs in the middle of those bookends — young, sub-$50M turnover, pre-pivotal-trial — receive the clearest benefit. Companies at either end will need to plan for what the rate uplift, on its own, will not offset.What this means for Providers
The reforms also reshape demand for Australian CROs, CDMOs, academic facilities, and specialist labs. Members will look harder for Australian capability as higher core offset rates make outsourcing to domestic providers more cash-efficient, and the removal of supporting expenditure pushes more weight onto cleanly classified core R&D work. For sub-$50K claims from 2028, registered Research Service Provider status becomes a structural differentiator, since only registered RSPs and Cooperative Research Centres qualify. Providers that are easily found, well-described, and, where relevant, RSP-registered will see more inbound at higher intent.Where Pipeline Bio fits
For Australian biotech teams, the Directory of Providers and the Capability Taxonomy make it faster to identify Providers that fit cleanly inside a core R&D program. The RFP Summary Report produces a structured record of the Australian capability search conducted before going offshore. For Providers, Pipeline Bio surfaces capability to Members under pressure to find, classify, and document Australian R&D activity correctly. Visibility and clean classification are becoming operational requirements, not marketing extras. For biotech leadership, the RDTI is becoming less a tax planning exercise and more an operating decision. Pipeline Bio is built for that environment.Related
The Capability Taxonomy
How capabilities are classified, compared, and documented.
Finding R&D Providers
The Directory, the Catalogue, and the AI Search Agent in practice.