Companies engaged in gambling activities will no longer be eligible for Australia’s Research and Development (R&D) tax incentive, a lucrative programme designed to foster innovation and growth across industries.

The move, outlined in the Mid-Year Economic and Fiscal Outlook (MYEFO) papers and set to be implemented from 1 July 2025, reflects the government’s growing concern about the societal and health impacts of the sector.

The MYEFO papers emphasised that R&D in gambling could “exacerbate addiction and associated harms,” while activities related to tobacco contribute to increased health risks.

It added that excluding these activities ensures that the government won’t subsidise R&D related to harmful products.

The decision to exclude gambling, as well as tobacco-related R&D, from tax concessions comes amid heightened scrutiny of how public funds are used to support private-sector innovation.

The Australian Tax Office (ATO) recently revealed that gambling companies claimed nearly A$90m in R&D tax credits during the 2021/22 financial year alone.

The largest beneficiaries included prominent gambling operators such as Tabcorp, which claimed A$39.5m, and Aristocrat, which secured A$22.2m.

Other claimants included Ainsworth Game Technology (A$15m) and PointsBet (A$9.95m), with smaller amounts claimed by other gambling companies.

Treasurer Jim Chalmers has been a vocal advocate for reforming access to government tax incentives, particularly for industries that contribute to societal harms.

“Tax concessions should serve the public interest, supporting innovation that improves lives and drives sustainable growth,” Chalmers said in a statement. “It is not appropriate for industries that exacerbate addiction or harm public health to benefit from these programmes.”

Heightened fiscal awareness

The exclusion of gambling and tobacco industries from R&D tax incentives is part of a broader government push for fiscal responsibility as Australia faces a federal budget deficit of A$27bn.

According to MYEFO forecasts, structural deficits are expected to grow in the coming years, with national debt projected to reach A$1tn by the 2025/26 financial year.

The government’s decision to tighten the eligibility criteria for R&D concessions is viewed as a step towards addressing these financial challenges while ensuring public funds are allocated to projects with clear societal benefits.

Critics of the gambling industry have welcomed the announcement, highlighting the significant social costs associated with gambling addiction.

Advocacy groups have long argued that the industry’s access to public funding through tax concessions contradicts efforts to mitigate gambling-related harm.

The inclusion of R&D tax credits in the sector has been contentious, with many questioning whether such claims genuinely promote innovation or primarily serve as a financial advantage for companies.

The decision also underscores the government’s commitment to transparency in the allocation of public funds. In a new initiative aimed at fostering accountability, the ATO will now publish annual data on R&D tax credit claims, two years after the relevant financial year ends.

The latest figures, covering 2021/22, provide a detailed breakdown of which companies have benefited from the scheme and by how much. This increased transparency is expected to enable greater public scrutiny and reinforce the integrity of the program.

NEXT.io reached out to several companies for comment, including Tabcorp, Ainsworth and others, but did not receive a response before publication.

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