Capital is harder to raise in 2026 than it was a few years ago, and investors are spending longer in due diligence before they sign. One thing more of them are now checking properly: the startup’s R&D Tax Incentive position.
If you’ve claimed the R&D Tax Incentive, or you’re planning to, your cap table and your claim are no longer separate conversations. A funding round can change what you’re entitled to claim. A sloppy claim can show up as a liability on a term sheet. Founders who understand this going in have an easier raise than those who find out from their investor’s lawyer.
Why this is coming up more in 2026
Venture funding in Australia has been tighter for a few years running, and that tends to mean longer, more thorough diligence rather than shorter, more relaxed diligence. Investors writing fewer cheques spend more time on each one. For a startup with government money already in its financial statements, whether that’s R&D Tax Incentive refunds, a grant, or both, that history is now part of the file an investor’s advisor works through before term sheets get signed.
It’s not a red flag to have claimed the R&D Tax Incentive. Most serious Australian tech, hardware and biotech startups have. What advisors are checking for is whether the claim was built properly and whether the deal in front of them is about to change what it’s worth.
What investors are actually checking
Most founders assume investor due diligence on R&D Tax Incentive claims is a formality, a quick look to confirm the cash came in. It isn’t. A thorough investor, or their advisor, will typically check:
Whether the company has claimed before, and whether those claims are defensible if the ATO or AusIndustry comes back to review them. The R&D Tax Incentive is self-assessed, which means you register first and get checked later. A claim that’s been paid out isn’t necessarily a claim that’s been approved.
Whether the registered activities reflect genuine technical uncertainty, rather than standard development work described in R&D language. AusIndustry can direct the ATO to deny a claim built on a weak hypothesis or a commercial rather than technical focus.
Whether the documentation exists to back the numbers. Time records that separate R&D hours from non-R&D hours, contemporaneous notes, and a clear link between claimed costs and registered activities. Self-assessment means you’re the one who has to produce the evidence, not AusIndustry or the ATO.
Whether the company’s ownership structure affects the offset it’s entitled to. This is the part most founders have never thought about, and it’s the one that can change the moment a term sheet is signed.
The $20 million line that can move under you
The refundable R&D Tax Incentive offset of up to 43.5% is only available to companies with aggregated turnover under $20 million. Above that, the offset becomes non-refundable, which means it reduces tax payable rather than paying out as cash. For a pre-revenue or early-revenue startup, that difference is the whole point of claiming.
Aggregated turnover isn’t just your company’s revenue. It adds in the turnover of any entity connected to you and any entity affiliated with you. Two entities are connected if one controls the other, and control is generally set at 40% ownership, whether through shares, voting rights or rights to dividends. An affiliate is an entity that could reasonably be expected to act on your direction.
This is where it bites founders raising a round. If an investor takes a 40% or greater stake in your company, that investor’s other income can be pulled into your aggregated turnover calculation. A large fund with billions in revenue sitting elsewhere doesn’t need to touch your business operationally to affect your R&D Tax Incentive offset. The ownership stake alone can do it.
This is exactly the kind of detail a sharp investor’s advisor will model before they sign, and exactly the kind of detail a founder needs to have already modelled before they’re in the room.
A real example of how this plays out
In 2024, the Australian arm of a software company called Plutora went into voluntary administration after a dispute connected to this exact issue. Macquarie Capital had held a stake reported at around 45% of the company. The ATO treated that stake as pushing Plutora’s aggregated turnover above the $20 million threshold, converting its R&D Tax Incentive offset from refundable to non-refundable. The administrator’s report cited roughly $900,000 in repayments the ATO was seeking as a result. Some figures around the deal remain disputed between the parties, but the core mechanism isn’t: a large ownership stake changed what the company was entitled to claim, and the company hadn’t built that risk into its planning.
You don’t need an investor that size for the same mechanism to apply. The threshold test is about percentage of ownership and the investor’s own turnover, not the deal size in dollar terms.
If a 40%-plus investor is already on your register, get the aggregated turnover calculation done properly and know exactly where you stand before the next funding conversation or the next claim lodgement. Sometimes the ownership structure can still be adjusted for future rounds. Sometimes the answer is simply that future claims will be non-refundable, and that needs to be in your cash flow forecasting rather than a surprise at tax time.
What’s changing in 2028, and why it matters now
The 2026 Federal Budget proposed a significant reshape of the R&D Tax Incentive, though none of it is legislated yet and the earliest proposed start is 1 July 2028. Current rules apply in full through the 2027-28 income year. If the measures do become law, founders should expect:
The refundable turnover threshold to rise from $20 million to $50 million, giving more room before an investor’s stake pushes a claim out of refundable territory.
The minimum R&D spend to qualify to rise from $20,000 to $50,000.
Supporting R&D activities to lose automatic eligibility, with only core experimental activities qualifying. For startups that have leaned on supporting activities to pad out a claim, this would tighten things considerably.
Refundable cash offsets to be limited to a company’s first 10 years of operation, with older companies moved to non-refundable treatment regardless of turnover.
A core offset rate roughly 4.5 percentage points higher than today’s, which is where the commonly quoted “up to 48%” figure comes from.
The R&D intensity threshold for the higher premium rate is also proposed to drop from 2% of total business expenditure to 1.5%, which would let more companies qualify for the top rate, and the annual expenditure cap that offsets apply to is proposed to lift from $150 million to $200 million.
None of this is law yet, and a lot can shift in consultation before it is. But founders raising now, especially anyone on a multi-year roadmap, should model both the current rules and the proposed ones before locking in a cap table or a claim strategy. A higher refundable threshold is good news for startups taking on larger investors. A 10-year cap on refundability and the loss of supporting activities are not, and both deserve a place in your planning well before 2028 arrives.
Walking into a raise with a clean R&D position
A few things are worth doing before term sheets start arriving, not after.
Get an independent review of your claim history before a raise, not during one. If there’s a weakness in a past claim, you want to find it before your investor’s advisor does.
Model the ownership test against your proposed round, not just your current turnover. If a single investor’s stake will sit at or above 40%, get advice on what that does to your offset before you agree to the number.
Keep your documentation current as you go, not reconstructed at claim time. Time records, technical notes and a clear hypothesis for each registered activity make the difference between a claim that survives scrutiny and one that doesn’t.
Don’t let supporting activities carry a claim that should be built on core R&D. It’s a weaker position today and, if the 2026 Budget proposals pass, it won’t be an option at all.
If you’re raising from a fund or corporate investor large enough to affect your aggregated turnover, raise the R&D Tax Incentive question with your advisor before the term sheet, not after.
Check whether your accountant is actually equipped for this. Most accountants are excellent at the financials and the general tax return, but AusIndustry registration and the technical R&D write-up sit outside what a general practice handles day to day. Ask the question directly rather than assuming it’s covered.
Where your business has used overseas developers, check whether any of that spend is sitting in your claim without an Overseas Finding. These findings are difficult to obtain for software work and need to be in place before year end, and an investor’s advisor will know to look for exactly this gap.
A clean R&D Tax Incentive position protects the cash you’ve already claimed. It also gives an investor one less thing to find a problem with, and one more reason to move faster through due diligence instead of slower.
If you want a second set of eyes on where your claim and your cap table intersect, granton.io/meet is a quick, no-cost conversation. We only take on claims we’re confident in, and we’d rather tell you about a risk now than have your investor find it later.
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