A National Conversation: Strategic Examination of Research and Development
Authors: Jacqueline Heighway & Matthew McLean
The Australian Government Department of Industry, Science and Resources (DISR) has released a series of six Issues Papers written by the independent Strategic Examination of Research and Development (SERD) panel and follow analysis of a published discussion paper and public submissions feedback on how to maximise the value of existing investment in R&D, strengthen linkages between research and industry, support the achievement of national priorities, drive greater R&D investment by industry and boost innovation, and uplifting Australia’s overall R&D intensity.
The Highlights
The six issues papers were released between August and September and explore Australia’s current R&D landscape and propose future directions for reform to increase the impact of research, development and innovation (RD&I). Entitled topics are:
Paper 1: National coordination
Paper 2: Scaling the system
Paper 3: RD&I incentives
Paper 4: Investment and capital
Paper 5: Foundational research
Paper 6: Government as an exemplar
Strengthening Australia’s R&D Ecosystem: A Call for Targeted Reform
Australia’s innovation potential is vast, but unlocking it requires thoughtful reform. Below, we offer our perspective on some of the key areas addressed in these Issues Papers, where policy adjustments could significantly enhance the effectiveness and accessibility of R&D support.
Government as an exemplar
Governments at all levels—federal, state, and territory—have a critical role to play in fostering innovation by serving as exemplars in public procurement and policy reform. By initiating programs that identify pressing challenges and fund innovative solutions, governments can act as early adopters, helping to scale emerging technologies and strengthen domestic capability. Leveraging public investment into R&D, including superannuation through APRA, is not only a strategic economic tool but also a demonstration of genuine commitment to Australia’s innovation ecosystem. While governments often celebrate the achievements of Australian businesses and their R&D efforts, it is imperative that such recognition is matched by tangible support through procurement decisions that prioritise innovation and impact.
Addressing the $20 million turnover threshold cliff
The current $20 million turnover threshold for accessing the refundable R&DTI has remained unchanged since 2011. This static benchmark fails to reflect inflation and the modern realities of scaling SMEs. As a result, businesses face a steep “cliff”, where a company earning $19.9 million qualifies for a valuable refundable offset and a marginal increase in turnover results in significantly less favourable terms. This abrupt transition penalises growth of SMEs and undermines innovation incentives.
We support SERD’s suggestion for the introduction of phased on/off ramps to smooth transitions and maintain support as firms scale. For instance, Brisbane-based biotech company Microba Life Sciences Ltd (ASX: MAP), with projected FY2025 revenue of $15.7 million, increased by 30% from FY2024, is still in expansion mode. Another 30% increase in FY2026 will see them lose valuable support through the R&DTI program, thus punishing expansion and stalling growth. Under current rules, surpassing the $20 million threshold could prematurely strip them of critical support.
Diversifying funding pools to broaden access
Expanding the diversity of funding mechanisms is essential to ensure fairness in grant funding distribution and will support a wider range of businesses and collaborative ventures to participate meaningfully in R&D. We strongly support SERD’s suggestions of Australian R&D funding reform through:
Segmented support for startups, SMEs, and large enterprises: Tailoring funding to the specific needs and growth stages of different business types with targeted, strategic allocation will allow for higher participation and earlier scale up of SMEs competing in funding pools with more established players.
Repayable grants and convertible notes as an alternate funding arrangement: These instruments offer a pragmatic way to encourage more investment in Australian R&D, opening the door for greater early-stage innovation support while ensuring ROI and maintaining fiscal responsibility.
Enhanced university-industry collaboration: Government grants have an essential role to play in improving commercialisation pathways and strengthening partnerships between academia and industry. These partnerships strengthen sovereign capabilities, attract private co-investment, and ensure public research funding delivers practical outcomes. By fostering shared infrastructure, reducing reliance on foreign technology, and developing diverse PhD and early-career researcher pathways targeted to support industry, Australia will be able to build a more resilient, skilled, self-reliant, and competitive economy.
Funding program complexity, scrutiny, and the role of advisors
The R&DTI program’s complexity has led to widespread reliance on third-party advisors. Contrary to the assumption that this represents a leakage of value, we view it as a necessary response to structural challenges:
86% of businesses engage consultants to navigate the system due to the intricate and demanding nature of the application process.
Recent changes to the R&DTI registration of activities application form have increased the time and effort required to complete forms, which—while potentially aiding evaluation of eligibility—place a heavier burden on applicants.
Recent changes in ATO procedures from facilitating friendly advice where errors or inconsistencies are noted to full-audit-mode will drive more businesses to seek certainty of program compliance by involving 3rd-party consultants.
Advisors play a crucial role in reducing compliance risk, ensuring integrity, and supporting claimants through the “grunt work” of documentation and eligibility assessment.
Simplification efforts should aim to genuinely reduce complexity, allowing businesses to feel confident and empowered to navigate the system on their own should they choose.
R&D Financing: a strategic adjunct offering a necessary lifeline
Criticism of R&D Financing through organisations such as R&Dium Capital by the SERD Issues Papers overlooks its strategic value. The R&D Financing option allows companies to recycle refunds into additional R&D activity—sometimes multiple times per year—thereby accelerating innovation. Additionally, many financing arrangements bring foreign capital inflow investment into Australia, leveraging it for domestic R&D.
Discouraging financing while simultaneously encouraging rapid startup growth presents a contradiction. Many R&D businesses adopt a portfolio approach, combining the R&DTI, advisory support, and R&D Financing to extend their capital runway and maximise innovation outcomes.
Conclusion
Australia stands at a critical juncture in shaping the future of its research and development ecosystem. The Issues Papers released by DISR and the SERD panel offer a timely opportunity to reimagine how we support innovation—from diversifying funding mechanisms and reforming outdated thresholds, to simplifying compliance and recognising the strategic role of financing. As stakeholders across the R&D landscape engage with these proposals, it is essential that reforms reflect the realities of scaling businesses, foster collaboration between academia and industry, and empower innovators to thrive. With thoughtful, targeted adjustments, Australia can build a more inclusive, agile, and globally competitive R&D system—one that rewards ambition, supports growth, and delivers lasting national benefit.
If you would like to talk about how we can help you foster your ideas, please don’t hesitate to reach out.