R&D Tax Incentive Changes from 1 July 2028: What EPC and Solar Businesses Should Do Now
If your business claims the R&D Tax Incentive, the rules are set to change from 1 July 2028. The Government announced the changes in the 2026-27 Budget on 12 May 2026, and Treasury released draft legislation on 11 September 2026. Consultation closed on 28 September 2026.
The changes are not yet law. The ATO says so on its own page, and business.gov.au says the program keeps running under the current rules until then. So nothing changes for this year's claim. But some of the changes hit the way EPC and solar businesses usually claim, and the records you keep from now on will decide how well you're placed in 2028.
What's been announced
The ATO lists seven changes. All of them are due to start on 1 July 2028 and apply to all R&D entities.
Core R&D gets a higher rate. Supporting R&D drops out.
The offset rate for core R&D activities goes up by 4.5 percentage points.
Supporting R&D activities would no longer be eligible for the offset.
For the non-refundable offset, the intensity threshold for the higher premium drops from 2% to 1.5% of total expenditure.
The refundable offset is narrowed.
It would be limited to a company's first 10 years of operation. The Treasurer's release says biotechnology and medical technology firms would get up to 15 years.
The aggregated turnover threshold rises from $20 million to $50 million.
The minimum R&D spend in a year rises from $20,000 to $50,000.
Large claims get more room.
The maximum expenditure threshold rises from $150 million to $200 million.
How that compares with today
Under the current rules, a company with aggregated turnover under $20 million gets a refundable offset equal to its company tax rate plus an 18.5% premium. For a base rate entity taxed at 25%, that's 43.5% of eligible spend, and any amount above your tax bill comes back as cash.
Above $20 million, the offset is non-refundable: your company tax rate plus 8.5% on R&D spend up to 2% of total expenditure, and plus 16.5% on the part above 2%.
We haven't worked out the new rates for you here, because the final figures depend on what Parliament passes.
Why this matters for EPC and solar businesses
Most R&D in our industries happens on real projects. A new battery integration set-up gets trialled on a client's site. A commissioning method gets tested on a live job. The experiment itself is core R&D. A lot of the work around it, like test installations, monitoring and validation runs, is often claimed as supporting R&D.
Supporting activities have to be directly related to a core activity, and some of them also have to be done for the dominant purpose of supporting it. If supporting R&D drops out in 2028, claims that lean on that work will shrink, even with a higher core rate.
The 10-year limit is the other one to watch. Plenty of established installers and EPC contractors have been trading for more than a decade. If that's you and you currently get a cash refund, you may only have the non-refundable offset from 2028. That's worth much less in a year with a tax loss.
Five things to check now
Your company's age. Work out how long your company will have been operating at 1 July 2028. If it's past 10 years, model your claim without a refund. The draft law will set out exactly how the 10 years is counted, so confirm it once the bill passes.
How much of your claim is supporting R&D. Go back through your last two claims and split the spend between core and supporting activities. That one number tells you how exposed you are.
Your spend against $50,000. Smaller claims that sit between $20,000 and $50,000 a year may not clear the new minimum. Look at whether your R&D work is spread thin across years or concentrated in one.
Your records on core activities. If core R&D is what counts from 2028, the hypothesis, the plan, the results and the timesheets for each core activity matter more than ever. Build them as the work happens, not at claim time.
Your current registration dates. The current rules still apply until 30 June 2028. You register within 10 months of the end of the income year, so FY26 activities need to be registered by 30 April 2027. Don't let the noise about 2028 make you miss this one.
If you want the basics of eligibility, registration and what tends to qualify in our industries, see our guide to the R&D Tax Incentive for EPC, solar and renewables operators.
What happens next
The draft legislation still has to be finalised, introduced and passed. Details can change on the way. We'll update this post when the bill is introduced.
Talk to a CPA
TechEdge is a CPA-led outsourced finance team for Australian construction, EPC, solar and renewables businesses. We help clients keep R&D records as the work happens, track spend against core activities, and plan cash around the offset.
Book a free 30-minute call with a CPA, email info@techedgeaccounting.com.au or call +61 468 634 973.
This article is general information only and is not financial, tax or legal advice. It is based on the ATO page on better targeting the R&D Tax Incentive, the ATO rates of R&D tax offset page, business.gov.au and the Treasurer's media release of 11 September 2026, as at 19 October 2026. The 2028 changes are announced but not yet law, so check the current position or speak to your adviser before relying on them.
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