Australia’s R&D policy landscape may be entering a period of significant change, with the Federal Government’s ‘Ambitious Australia – Strategic Examination of R&D’ being one of the most significant reviews of Australia’s innovation system in over a decade.
While the government is yet to formally respond to the report, released 17 March 2026, the report is clear in its diagnosis: Australia’s R&D system is underperforming, fragmented and not delivering the level of economic impact required for long-term growth.
For businesses accessing (or considering) the R&D Tax Incentive (RDTI), this is not just policy commentary. It signals a likely shift in how innovation is assessed, supported and rewarded in Australia. Read on for the key themes from the report’s 20 detailed recommendations.
A fundamental shift: from activity to impact
One of the most important insights in the report is a change in philosophy. Historically, the RDTI has operated as a broad-based incentive, supporting a wide range of companies undertaking eligible R&D activities.
This review challenges this model. It argues that Australia has focused too heavily on inputs like spend, activity and eligibility and not enough on outputs such as commercialisation, productivity and economic impact. In response, the panel recommends a greater focus on high-growth companies, emerging industries, and technologies with national strategic importance.
If implemented, this could gradually shift the RDTI from a broadly accessible incentive toward one that more strongly prioritises:
- R&D that leads to scalable outcomes
- Supporting companies with clear growth trajectories
- Linking innovation support more closely to economic contribution developing globally competitive technologies
Why this matters: The strength of an R&D claim may increasingly be judged not just on technical eligibility, but on the commercial context and trajectory of the business. If your R&D isn’t clearly driving growth, scaling your operations or leading to a commercial product, your future claims might face much tougher scrutiny.
The emerging ‘two-tier’ innovation system
A subtle but important theme in the report is the likely emergence of a two-tier system of innovation support:
- Growth-focused companies (RDTI-led support)
- Startups, scaleups, and high-growth SMEs
- Businesses reinvesting in R&D
- Companies with global or export ambition
These are the businesses the report clearly wants to prioritise through the RDTI.
- Broader SME innovation (grant-led support)
- Smaller or lower-growth businesses
- Companies experimenting but not scaling
- Early-stage or opportunistic innovation
The report suggests that these businesses may be better supported through targeted grants or collaboration programs, rather than through the tax system.
For high-growth SMEs, this could mean more targeted support and improved access; however, smaller innovators may face reduced eligibility and a shift toward more competitive, discretionary grant funding.
Startups move to the centre of policy
The report places significant emphasis on startups as the engine of future economic growth. The proposed premium RDTI stream for startups, including simplified access and improved cashflow support, reflects a clear intent to:
- Reduce friction in early-stage innovation
- Accelerate commercialisation pathways
- Strengthen Australia’s startup ecosystem
Why this matters: This aligns Australia more closely with global innovation policy trends, where governments are increasingly competing to attract and retain high-growth technology companies. In practice, this may mean less red tape and better cashflow support for early-stage startups when they need it most to survive and scale.
A more selective RDTI – and what that means in practice
Perhaps the most commercially relevant, and sensitive, implication is the potential tightening of eligibility over time. The report is explicit that ‘some low-growth SMEs may become ineligible under a more focused system’.
This does not necessarily mean immediate exclusion – but it does suggest a gradual shift toward:
- Higher expectations around innovation intensity
- Stronger focus on reinvestment in R&D
- Greater scrutiny of business growth and ambition
Why this matters: Businesses may need to move beyond simply demonstrating that activities meet the legislative definition of R&D – and instead clearly articulate:
- Why the R&D matters commercially
- How it contributes to growth or competitive advantage
- What the pathway to market or scale look like
A new governance model: the National Innovation Council
Beyond changes to incentives, the report recommends a significant shift in how Australia’s innovation system is governed.
At the centre of this is the proposed National Innovation Council, which would oversee research, development and innovation (RD&I) funding, set national priorities and coordinate efforts across government, industry and research institutions.
The intention is to move away from a fragmented system with multiple overlapping programs, toward a more coordinated, outcomes-driven approach aligned to a small number of national innovation priorities.
Why this matters: Over time, this could lead to:
- Greater alignment between RDTI claims and national priority sectors
- More coordinated funding pathways across tax incentives, grants and investment programs
- Increased focus on large-scale, high-impact initiatives
Increased focus on attracting global R&D investment
Another important theme is the desire to position Australia as a globally competitive destination for R&D investment. The report recommends stronger incentives for Multinational R&D activity, local collaboration and procurement and industry-linked research like PhDs in specific fields.
Why this matters: We may see a policy environment that increasingly favours:
- Companies embedding R&D in Australia
- Businesses contributing to local innovation ecosystems
- Organisations building long-term capability, not just undertaking isolated projects
The broader shift: innovation as economic policy
Stepping back, the most important takeaway is this: the R&D Tax Incentive is being repositioned – not just as a tax concession, but as a lever of national economic strategy.
The report links innovation directly to:
- Productivity growth
- Economic complexity
- Global competitiveness
- Long-term living standards
This reframing is significant, as it suggests that future policy settings may increasingly prioritise where R&D takes the economy, not just whether R&D is being undertaken.
What businesses can consider now
While no changes have been legislated and likely won’t be for a while yet, businesses investing in R&D should be proactively considering how they position their innovation activities.Key questions for consideration include:
The R&D Tax Incentive remains a critical part of Australia’s innovation framework. However, the review signals that over time, the system may become more targeted, more strategic and more outcomes-focused.
For businesses genuinely investing in innovation, this direction should ultimately be positive. But it does reinforce an important shift: innovation is no longer just about doing R&D, it is about what that R&D enables.
For more information on how this might affect your business, please contact your local William Buck R&D advisor.
