Australia’s R&D Tax Incentive has long been a lifeline for innovators. Yet, the game just changed—and if your startup is dabbling in gambling tech or tobacco-related products, you’re officially out of the running.
The Government has now released an exposure draft for the Treasury Laws Amendment Bill 2025 that slams the door on R&D activities tied to gambling and tobacco for income years starting 1 July 2025. Why? These industries are seen as fueling addiction and public health risks. The government doesn’t want taxpayer dollars subsidising harm.
The full draft amendment can be viewed on the Australian Government Treasury site here with explanatory material available here.
What’s Out?
- Gambling services (think betting platforms, casino tech, gaming algorithms)
- Gambling-like practices (loot boxes, chance-based monetisation)
- Tobacco products and accessories (including vaping goods and nicotine delivery systems)
- Anything using tobacco or nicotine in manufacturing
If your R&D involves making gambling more addictive or vaping more “satisfying,” forget about claiming the incentive.
The One Loophole: Harm Minimisation
There’s a silver lining—if your research is solely about reducing harm, you’re still in the game. Examples:
- Tech to block self-excluded gamblers from online platforms.
- Therapeutic solutions for nicotine cessation.
- Public health innovations to curb addiction.
But here’s the kicker: “Harm minimisation” isn’t about making gambling safer or tobacco less harmful—it’s about ending the harm entirely. Lower-nicotine cigarettes? Still out.
Example 1: Excluded Gaming R&D Activity
Company1 is developing a new loot-box monetisation system for an online game. This system focuses on creating algorithms that increase player engagement through chance-based rewards.
Company1 self-assesses that the outcome of this development process cannot be known or determined in advance, follows a systematic progression of work, and is conducted for the purpose of generating new knowledge.
Company1 would normally apply to register its R&D activities within 10 months of the end of the 2025-26 income year. However, because loot boxes are considered a gambling-like mechanic that can encourage addictive behaviour, this activity is explicitly excluded under the new rules.
Example 2: Eligible Gaming R&D Activity
Company2 is building an AI-driven tool to detect and block self-excluded players from accessing online gaming platforms.
Company2 self-assesses that the outcome of this development process cannot be known or determined in advance, follows a systematic progression of work, and is conducted for the purpose of generating new knowledge.
This research aims to reduce gambling harm by preventing vulnerable individuals from relapsing. Since the sole purpose is harm minimisation—not enhancing gameplay or monetisation—this activity remains eligible for the R&D Tax Incentive and Company2 can apply to register its R&D activities within 10 months of the end of the 2025-26 income year.
Why This Matters for Startups
Startups thrive on incentives. Losing R&D tax offsets can crush your runway. If your business model leans on gambling mechanics or nicotine products, it’s time to pivot—or risk burning cash without government backing.
What You Should Do Now
- Audit your R&D pipeline: Are any projects gambling or tobacco-adjacent?
- Reframe for harm minimisation: Can you spin your innovation toward addiction prevention or cessation?
- Stay compliant: These rules kick in for income years starting July 2025. Advance findings won’t save you.
The message is clear: Australia wants its innovation dollars driving health and wellbeing—not addiction. For startups, that means adapt or die.
Navigating grant and incentive applications can be complex, but you don’t have to do it alone. Fullstack Advisory specialises in helping SME, startups, and entrepreneurs secure funding and scale impact. Book a free consultation today with our R&D Grants consultants to get expert guidance on your grants and incentives applications and maximise your chances of success.
