Government releases long-awaited RDTI draft legislation

The government has released draft legislation to exclude activities related to gambling and tobacco from Research and Development Tax Incentive (RDTI) eligibility.

This announcement comes after the draft legislation implementation changes were first shared in the Mid-Year Economic and Fiscal Outlook 2024–25, with interested stakeholders encouraged to provide a submission on the draft legislation by 30 January 2026.

According to Daniel Mulino, Assistant Treasurer and Minister for Financial Services, the exclusions would apply broadly and capture research and development (R&D) related to all types of gambling, any tobacco and nicotine products from 1 July 2025.

“These exclusions will ensure taxpayers are not subsidising this kind of research and development that can exacerbate serious health risks, addiction and associated harms,” he said.

“A carve-out will apply for research and development activities that are conducted solely for harm minimisation, such as reducing addiction, ensuring these activities remain eligible to receive support under the program.”

Over the course of the year, there was a significant level of conversation around research and development, as well as the value of stronger policies around it.

Before the Economic Reform Roundtable in August, the Business Council of Australia released a report highlighting that improved policies could add over seven billion annually to Australia’s GDP and boost productivity growth by 0.1 per cent each year.

The exclusion of gambling and tobacco from the RDTI accompanied the draft legislation, which outlined that subsidising advancements in these sectors was inconsistent with national health objectives and could undermine efforts to reduce addiction prevalence.

Following the reveal of the exposure draft legislation, RSM partner Jessica Olivier and RSM national tax technical director Roisin Arkwright said that while no new or high-impact R&D announcements were made during 2025, several practical and administrative changes were implemented by both the Department of Industry, Science and Resources (DISR) and the ATO.

It was also noted that the strategic examination into Australia’s R&D system had made some progress and the first RDTI decision was made by the Administrative Review Tribunal.

“A patent decision this year means that the alignment between patents and RDTI eligibility is likely to start to diverge, and the ATO has continued to focus on the substance of ‘Australian-owned’ R&D claims made by inbound multinationals,” Olivier and Arkwright said.

“The second tranche of RDTI transparency information was published, with the claim profile substantially changed by the first-time inclusion of around 850 multinationals with substituted accounting periods (SAPs) for 2022-23.”

The pair noted that despite the release of the exposure draft legislation so close to the end of the year, “one could be forgiven for thinking it had been an unremarkable year for the RDTI regime”.

“However, several other developments, some of which have largely escaped headlines, remain worthy of reflection in respect of how the operation of the RDTI regime has been or may continue to be affected.”