The Australian government has announced that gambling and tobacco-related activities will no longer qualify for the Research and Development (R&D) Tax Incentive, a policy aimed at fostering innovation and business growth. The exclusion, revealed in the Mid-Year Economic and Fiscal Outlook, is set to take effect from July 1, 2025, and aligns with the government’s broader efforts to address addiction and associated harms.

Government to end tax incentives for gambling and tobacco:

The R&D Tax Incentive provides tax offsets for companies conducting eligible research and development. However, the government has decided that activities linked to gambling and tobacco, due to their potential to exacerbate societal issues, should no longer receive taxpayer support.

Treasurer Jim Chalmers emphasized the rationale behind this decision, stating that it is inappropriate for public funds to subsidize research that could contribute to addiction. “Excluding these activities will ensure that the government is not subsidising this type of research and development,” the government clarified.

The policy change, which requires legislative approval, is expected to save taxpayers AU$20 million over four years. Beginning in the 2023–24 fiscal year, it will increase tax receipts by AU$6 million annually starting in 2026–27 while also reducing payments by AU$4 million per year.

Until the legislative amendments are enacted, the Department of Industry, Science and Resources and the Australian Taxation Office (ATO) will continue to oversee the program, ensuring compliance with the current rules.

The government has noted that R&D projects aimed at harm reduction, such as those focused on minimizing addiction, will remain eligible for tax support.

Industry backlash and concerns:

The decision has sparked strong criticism from the gambling sector. Responsible Wagering Australia (RWA), a peak body representing major operators like Sportsbet and PointsBet, described the move as ideologically driven and detrimental to innovation and economic growth.

RWA CEO Kai Cantwell expressed frustration over the lack of consultation with industry stakeholders, stating that the announcement “blindsided” the sector. According to Australian Financial Review (AFR), Cantwell also warned of the broader implications for other industries that could be similarly targeted.

“Today, it’s gambling companies being targeted, but any industry could be next if it’s used as a bargaining chip or horse-traded in future political deals,” Cantwell said. “This slippery slope opens the door for tax policy to become a tool of moral judgment rather than a driver of economic growth.”

The Gaming Technologies Association, representing poker machine manufacturers, acknowledged that harm minimization initiatives will still be eligible for R&D incentives. However, the exclusion of broader gambling-related R&D has raised concerns about stifling technological advancements in the industry.

Several major players in the gambling sector, including Tabcorp, Aristocrat, and AinsworthGame Technology, are significant users of the R&D Tax Incentive. According to the ATO, these companies allocated millions to research and development in 2021–22:

  • Tabcorp: AU$39.5 million
  • Aristocrat: AU$22.1 million
  • Ainsworth Game Technology: AU$15 million

The industry fears that removing tax incentives could redirect R&D efforts to countries with more favorable policies, leading to a potential loss of Australian jobs and innovation.

Critics have argued that the government’s decision sets a dangerous precedent, potentially paving the way for future exclusions based on moral or political considerations. Cantwell warned that industries like fast food, alcohol, and fossil fuels could face similar scrutiny.

“This cherry-picking approach undermines the neutrality of the tax system. It leaves businesses guessing who will be next,” Cantwell said.

Labor backbencher Mike Freelander, a proponent of gambling reform, supported the government’s crackdown, citing the substantial harm caused by pokies, which were identified as the primary form of gambling for over 73% of problem gamblers in a NSW GambleAware report.

Industry leaders have called on the government to reconsider the exclusion and engage with stakeholders to develop policies that support innovation while addressing societal concerns. Cantwell emphasized the gambling sector’s ongoing commitment to consumer protection, even in the absence of government support.

“This has been the focus of the industry for years,” Cantwell said. “We will continue to invest in consumer protections, with or without government support.”