Australia's House of Representatives has introduced legislation to tighten the R&D Tax Incentive, barring claims for research connected to tobacco, vaping, and gambling — while preserving eligibility for harm-reduction and therapeutic purposes — with the changes set to take effect from 1 July 2025.
Australia’s House of Representatives introduced and gave the first reading to the Treasury Laws Amendment (Delivering an Efficient and Trusted Tax System) Bill 2026 on 25 March 2026.
The Treasury Laws Amendment (Delivering an Efficient and Trusted Tax System) Bill 2026 outlines several legislative changes aimed at refining the Australian taxation and superannuation systems.
A key provision of the bill proposes amendments to the Income Tax Assessment Act 1997 (ITAA 1997) to tighten exclusions under the Research and Development Tax Incentive by disallowing activities related to tobacco, vaping, and gambling, except where such activities are specifically aimed at harm reduction.
Activities related to gambling services, gambling-like practices, tobacco products, vaping goods, and nicotine products will no longer qualify as “core R&D activities” under the incentive. This means businesses operating in these sectors will be unable to claim tax benefits for research conducted in connection with these products or services.
However, the legislation is careful not to shut the door entirely on beneficial research — a harm minimisation exception is built in, which preserves eligibility for activities conducted solely to generate new knowledge about reducing the harms of gambling, or for therapeutic purposes such as the development of smoking cessation treatments. Naturally occurring nicotine found in food products is also exempt from the exclusions.
These changes will apply to all income years commencing on or after 1 July 2025.
