Linkedin
Facebook
Email
more
On Tuesday 17 March 2026, the Federal Government published ‘Ambitious Australia’, the final report of the Strategic Examination of Research and Development (SERD), an independent review of Australia’s innovation system chaired by Robyn Denholm as part of the year-long review process during 2025.
Background
The SERD review was announced by the Federal Budget 2024–25 Budget against a backdrop of falling large business R&D investment over the past decade, with Australia persistently well behind OECD countries since 2008 in terms of innovation expenditure as a share of GDP. The final report notes that the 2002 Intergenerational Report projected that GDP per person would grow 90% over 40 years, which by 2023 had fallen to an expectation of 57% growth over the next 40 years.
RSM Australia, together with other stakeholders and advisers, made substantive submissions to SERD, many of which are pleasingly reflected in the recommendations made in the final report. The Ambitious Australia Report now sets out a long‑term reform roadmap intended to both reverse Australia’s ongoing decline in business R&D investment and strengthen the long-term commercial impact of publicly supported research. The 20 recommendations made by the report focus on bold reform in respect of the following six elements:
- greater focus and scale for RD&I impact
- a world class foundational research system creating knowledge and expertise
- reforming incentives to build the RD&I businesses and industries of the future
- better connections to investment and capital to fuel the innovation cycle
- building workforce capability to power RD&I activities
- a national innovation narrative for the government to lead and champion.
These elements and recommendations are underpinned by the proposed establishment of a new governance framework in the form of a National Innovation Council, as well as six National Innovation Pillars (Health & Medical, Agriculture & Food, Defence, Energy & Environment, Resources and Technology) and National Strategic Initiatives, with targeted CSIRO funding.
On business R&D expenditure specifically, key changes are also recommended to the operation of the flagship Research & Development Tax Incentive (RDTI) regime, together with an expanded role for direct grants and improved access to cash‑flow support for innovative companies.
The Federal Government is now expected to consider the recommendations made and is likely to include any announcements for implementation in the Federal Budget 2026-27 to be handed down on 12 May 2026.
RSM Australia warmly welcomes the recommendations made by Ambitious Australia and considers that, although the Government has not yet committed to their implementation, the recommendations made could positively reshape future R&D policy, a desired outcome in a time of declining productivity and innovation.
RDTI reform and redesign recommendations
The report acknowledges that an internationally competitive RDTI regime should remain a core pillar of Australia’s innovation system for larger businesses, so features prominently in the recommendations on business incentives in terms of both reform and simplification. Broadly, the recommendations focus on substantively redesigning the RDTI regime to enable sufficient scale, certainty and commercial impact, particularly for rapidly‑growing and capital‑intensive innovative companies.
Specifically, key RDTI recommendations to existing RDTI attributes include:
Increasing the minimum spend threshold from $20,000 to $150,000 to enable a focus on more ambitious R&D, instead enabling ineligible entities to more readily access direct grant funding, as well as Australian research capabilities in universities, research agencies and innovation intensive corporations, with R&D collaboration vouchers of up to $150,000.
As part of pathway recommendations for SMEs to access the refundable offset while growing, lifting the refundable threshold for the RDTI tax offset from $20 million to $50 million, a recommendation made by RSM Australia.
This alignment with the current base rate entity (BRE) threshold will result in a simplified and more streamlined outcome as well as enabling more medium sized businesses to claim the refundable tax offset. This higher threshold would operate as an effective “on‑ramp”, allowing businesses time to translate R&D investment into commercial outcomes, with appropriate off‑ramps applied as entities scale beyond the BRE threshold, ensuring ongoing access to the refundable offset remains targeted to growth‑oriented businesses. Ideally, any legislative mechanism enacted should permanently align the refundable threshold to the BRE aggregated turnover threshold.
The removal of the current $150 million expenditure cap, again a recommendation made by RSM Australia.
This is a welcome outcome from the perspective of the international competitiveness of Australia’s incentives, or current lack thereof. Notably the original $100 million threshold enacted in 2014 was a temporary ten-year cap as the result of Parliamentary drafting on the run, in place of a proposed $20 billion aggregated turnover cap.
The removal of this arbitrary structural constraint will be welcomed by multinational entities (MNEs) with the recent implementation of the Pillar 2 rules in Australia now forming a more appropriate statutory and commercial threshold.
Introducing a fixed deemed benefit rate for supporting activities in proportion to the quantum of the core R&D expenditure, to reduce ambiguity, streamline the compliance process, and reduce record keeping obligations.
Although somewhat ambiguous, there is a recommendation to remove RDTI clawback rules, but given the context of the discussion, this may only extend to the interaction of the RDTI and the receipt of government grants.
The report also acknowledges the current complex intensity calculations for non-refundables and pleasingly recommends the removal of the current tiered rates.
Although intended by the Triple F report to increase ‘additionality’ in R&D spending, this academic concept has created unwelcome practical complexities and supports inequitable tax outcomes by discriminating against sectors with material non-R&D expenses.
There are also recommendations to introduce a simplified premium RDTI start up scheme with a higher refundable offset rate (+23.5%) for up to 3 years, based on a 100-point style test focused on key start-up indicators.
This could encompass quarterly cash refunds or advances, an issue raised in the early days of the RDTI regime, consulted on in 2012 with the draft legislation abandoned in 2013. Unsurprisingly, the SERD review also recognises the need for quarterly payments in the early years of a startup’s life.
For large RDTI claimants, the report also suggests enhanced benefits for good corporate citizens, as well as removing the RDTI offset from franking credit calculations to remove the inherent disincentive from investing in additional R&D. We also believe that, if enacted, this should extend to refundable claimants thereby removing the requirement for RDTI claimants to track deferred franking debits resulting from cash refunds received and later reduce franking credits arising on the payment of tax.
Strengthening the role of direct grants
The report also calls for a rebalancing of the funding mix provided by indirect tax incentives and direct grant funding, noting that tax offsets alone could be insufficient to drive activity in priority sectors or emerging industries.
Wider investor recommendations discuss complementary financing structures that would allow innovators to invest during development, rather than after year‑end. In practice, the report overall strengthens the policy case for cash‑advance style access to R&D support, whether delivered through the tax system itself or via government‑endorsed direct funding channels.
Key messages include boosting grant schemes to “globally competitive levels”, the better alignment of grants with national priorities, and improved coordination between grant programs and the RDTI to support projects across the full innovation lifecycle.
Importantly, Ambitious Australia proposes that direct grants operate as a complementary tool to the RDTI regime, particularly where early‑stage risk, capital intensity or spillover benefits are high. If adopted, such measures would materially change how businesses can plan and fund R&D programs.
Other overall recommendations
From a commercialisation perspective, a production tax credit or subsidy for onshore advanced manufacturing is recommended as well as prioritising government procurement of Australian R&D.
To provide better connections to investment and capital, the report recommends the mobilisation of superannuation investment and reform of the little-adopted Early-Stage Innovation Company (ESIC) incentive scheme and the ESVCLP incentives.
On the issue of strengthening an innovative workforce, the report focuses on incentivising a stronger alignment between universities and industry, increasing PhD stipends and the introduction of R&D vouchers of up to $150,000 to encourage businesses to conduct R&D projects with universities or research institutions.
Conclusions
Although legislative changes have yet to be considered, increased opportunities for businesses to combine simpler and larger RDTI claims with both grant funding and cash‑flow solutions are now likely. There will also be greater scrutiny of how RDTI settings can support commercialisation and scale, and a welcome increased likelihood of structural reform rather than minor incremental technical changes.
Indeed, since its inception in 2011, the RDTI regime has been subject to several incrementally negative changes as a result of innovation reviews, including the 2016 Triple F report, and other government interventions in 2014 and 2021 intended to reduce the cost to government.
Some 15 years on, the publication of these recommendations in Ambitious Australia now mark a pivotal positive moment for Australian R&D; it is to be hoped that the current Government will rapidly accept all of the recommendations as part of its touted tax reform agenda, and reshape how R&D in Australia is funded, incentivised and commercialised for the next decade and beyond.
In the meantime, R&D‑intensive businesses should consider reviewing their R&D strategic plans to ensure projects align with likely national priority areas and engage early with their tax and R&D advisers to understand how the potential reforms could affect their eligibility, funding mix and compliance requirements.
SUBSCRIBE TO FEDERAL BUDGET COVERAGE
