Ambitious Australia Report – Our Perspective
Authors: Shaun van Dijk, Jacqueline Heighway
The release last month of the much-anticipated Ambitious Australia Report - the key output from the Robyn Denholm-chaired Strategic Examination of Australian R&D - suggests significant changes are on the way to address Australia’s flagging R&D system.
Whilst it is exciting to consider the ideas proposed, history shows us that ambitious policy change at this scale can be challenging to deliver, especially in light of competing Government fiscal prioritises and the practical challenges of adopting the expansive reforms that are proposed.
This article outlines our initial thoughts on the Ambitious Australia Report and its recommendations, with a specific focus on the proposals impacting government funding and ideas to better incentivise business investment in R&D. We also draw some insights from the preliminary commentary of Federal Minister for Industry, Innovation & Science, Tim Ayres, to help speculate where to from here.
What Is Being Proposed?
Overview
The report is sweeping in its scope, unsurprising considering its stated objective and terms of reference:
“To identify how a more purposeful, coordinated approach to research, development and innovation (RD&I) can drive economic growth, productivity and national wellbeing.”
The result is the identification of 20 recommendations (supported by a framework of 35 sub-recommendations) across various aspects of the R&D ecosystem, including governance, foundational research, business incentives, capital markets, workforce, and government leadership.
At a macro-level the key themes of the report are as follows:
Australia underperforms in critical areas:
There exists a strong research base, but weak translation into products, industries and scalable businesses.The system is too fragmented and inefficient:
More than 150 R&D support programs are available, but there is declining investment and too much focus on inputs over outcomes.A need to shift to a more targeted, strategic model:
National coordination is proposed via a new National Innovation Council with a focus on six priority industry pillars: Health & Medical, Agriculture & Food, Defence, Energy & Environment, Resources, and Technology.Major changes proposed to business support & incentives:
Including a refocused R&D Tax Incentive program that is targeted at startups, scale-ups and high-impact R&D (see below our more detailed commentary on these changes).
Broader ecosystem reform:
Mobilising venture capital and unlocking angel and institutional investment (including superannuation funds) is vital, as are strengthening workforce capability and using government procurement to drive innovation.
The central message of the report is clear: while Australia produces strong research, we are not converting enough of that into globally competitive businesses, new industries and productivity growth.
In support of this message, the report cites damning statistics regarding Australia’s diminishing R&D investment and commercialisation capabilities. For example:
Australia ranks 105th out of 145 economies for economic complexity.
Business expenditure on R&D has fallen to just 0.9% of GDP, well below the OECD average of 1.99% and has been in persistent decline in the last 15-20 years.
Since 2009, business expenditure on R&D intensity has fallen by 31% and government R&D investment intensity has fallen by 37%.
Around 50% of export revenue comes from selling our natural resources and agricultural products, whilst we ha e one of the lowest shares of manufacturing in the OECD.
The 2023 Intergenerational Report projected GDP per person growth of just 57% over the next 40 years, down from the 90% projected in 2002.
In response, the report outlines ambitious policy changes across 20 key recommendations with the intention of reforming Australian R&D and innovation in order to boost our economic complexity, productivity and global competitiveness.
R&D Incentives for Business
A key pillar of the Ambitious Australia Report, and the focus of our analysis here, is the consideration of the ways in which Australian companies can be better incentivised to pursue R&D. Out of the 35 sub-recommendations included in the report, six relate specifically to this objective. This includes numerous suggested improvements to the operation of the R&D Tax Incentive (RDTI), the primary Federal government program for supporting business innovation. These recommendations and examples of proposed RDTI program changes include:
1. Simplifying the RDTI while focusing it on “high-impact” R&D
Narrowing eligibility toward activities with clear technical advancement or step-change outcomes, rather than incremental process improvements.
Reducing administrative burden through streamlined program rules and clearer eligibility criteria (potentially limiting borderline or routine claims).
2. Introducing a premium startup stream with faster, quarterly payments
Providing R&D offset payments to eligible early-stage companies on a quarterly basis rather than waiting until after year-end tax lodgement.
Simplified access and pre-approval pathways to provide greater certainty for venture-backed or high-growth startups.
3. Refocusing support toward growth-oriented SMEs and scale-ups
Prioritising companies demonstrating revenue growth, capital raising or reinvestment in R&D, rather than all SMEs undertaking eligible activities.
Tightening access for smaller or “lifestyle” businesses conducting limited or non-scalable R&D.
4. Increasing incentives for large corporates and multinationals
Providing enhanced offsets or concessions linked to conducting R&D activities in Australia.
Offering additional incentives tied to collaboration outcomes, such as partnerships with universities, procurement from Australian SMEs, or supporting industry PhDs
5. Expanding support toward commercialisation activities
Extending eligible activities (or complementary incentives) beyond core R&D to include pilot production, prototyping scale-up or early-stage manufacturing.
Supporting transition from lab-based development into market-ready products and processes.
6. Creating alternative funding pathways (such as grants) for businesses excluded from the RDTI as a result of the proposed changes
Providing targeted grant programs to encourage SMEs to engage with universities or research organisations to build initial R&D capability.
Providing proof-of-concept or early-stage innovation grants for companies not meeting revised RDTI thresholds.
What Does This Mean for Businesses?
While these remain recommendations only, the policy direction of the proposed reforms of R&D incentives for business seem to centre upon:
Greater emphasis on scale, ambition and commercial outcomes
Increased targeting of R&D incentives to startups and early-stage companies
A potential narrowing of access for many existing claimants.
For Australian businesses investing in R&D and innovation, the key question that the proposals seem to be promoting is not: "Are we doing eligible R&D?" but increasingly: "Are we doing the kind of R&D the Government wants to fund?"
We welcome the ideas to improve the delivery of RDTI and to better incentives business investment in R&D. Many of the proposals echo those that we identified in our submission to the review process, which are summarised here.
However, there are areas of concern that require deeper consideration given their potential impacts. For example:
1. Administrative complexity
We are uncertain whether the proposals will in fact be able to deliver one of the primary objectives of reforming R&D funding strategies – i.e. simplification of the RDTI program and better incentivising business investment in R&D. The proposed changes introduce multiple RDTI "streams" (startups, SMEs, corporates), greater subjectivity around "impact" and "growth," and a more centralised and strategic allocation of support. There are limited practical examples of how the increasingly complex R&D activity registration process will be improved.
2. Fiscal analysis & Federal Budget impact
There is no detailed fiscal modelling in the report. The proposed RDTI and government funding changes (including a higher refundable rate for startups, removal of the expenditure cap for large firms, extension of the refundable threshold to $50 million turnover, and new grant mechanisms) represent a significant expansion of government support. The narrowing of the program for SMEs may assist, but there is minimal consideration of how the recommendations will impact the already significant annual budget for the RDTI program (approx. $3 billion), or how government funding will be best distributed across the revamped combination of programs and incentives proposed.
3. Transitional impacts
A shift away from broad-based business support through the RDTI program has the potential to promote a funding gap for many existing RDTI users. In particular, the impact of raising the minimum R&D expenditure threshold from $20,000 to $150,000 could be significant. Based on the most recent 2022-23 RDTI Tax Transparency Report, 3,000 businesses (or approximately 24% of 2022-23 RDTI claimants) would fail to achieve this new threshold. Instead, the report proposes redirecting these businesses to a grant-based R&D collaboration voucher program. Whether that is an adequate and practical substitute for SMEs accessing the RDTI program is worth deeper consideration.
4. Business R&D funding mechanisms
The apparent redirection of government R&D incentives for business - shifting from a primarily tax incentive-based approach toward a more targeted, direct funding model involving discretionary, priority-driven programs such as grants - might significantly impact how R&D focused businesses secure and utilise non-dilutive funding to support their ongoing R&D. While this approach may better align government R&D funding with national priorities and high-growth sectors, it introduces greater subjectivity in funding allocations, and greater uncertainty for businesses. This risks discouraging consistent, incremental and productivity-driven R&D, particularly among SMEs, by making government support less accessible and less predictable.
Recent comments from the Minister of Industry, Innovation & Science
Speaking at the National Press Club on 25 March 2026, the week following the release of Ambitious Australia Report, Tim Ayres (the Minister for Industry, Innovation & Science) identified the need for ‘system-level change’ and provided the following commentary:
"Ambitious Australia sets out an agenda that should guide all of us for the next decade. This isn't something that you deliver in a single budget, or indeed in a single term of Government."
As with any major policy proposals such as this, the detail of implementation will matter far more than the headline intent. If the previous RDTI program review (the 2016 Ferris, Finkel & Fraser Review) is any guide, the key recommendations and reforms are not likely to be wholly adopted once filtered through deeper fiscal analysis. In this previous attempt at RDTI reform, many of the recommendations were significantly adapted, reconfigured and ultimately only partially adopted, whilst others were ignored altogether. This exemplifies how ambitious reforms to R&D policy ultimately need to be filtered and bent to the requirements and budget of an incumbent government.
When pressed further on the Government’s immediate plans for adopting the Ambitious Australia recommendations, Minister Ayres’ response at the National Press Club was measured: "This is a substantial piece of work for Australia and it requires system-level review. It's complex work. It's whole of government work. And I will take my time to work with colleagues to develop a whole of government response." On whether the budget is a limitation, he acknowledged that fiscal position and cost of living pressures are considerations.
On this basis, the message from government is clear: this will not result in immediate, short-term policy implementation, and will instead involve a system-level approach that may well extend over a considerable period of time.
Minister Ayres’ comments signal that the gap between recommendation and implementation may once again be substantial. The report itself warns that "adopting only parts will be another example of incremental changes and band-aid solutions." The Minister's own framing - that the report’s recommendations are not something to be delivered in a single budget - suggests that selective adoption and staged implementation might well be an approach that is adopted.
Our View & Next Steps
There are strong elements in the proposed reforms, particularly around enhancing R&D incentives for startups, improving translation, and encouraging industry-research collaborations. However, there also appears to be a real risk that, in trying to better target the high-impact business R&D incentives, the objective of simplifying RDTI and incentivising broader business investment in R&D may be compromised through additional complexity, subjectivity and reduced R&D funding accessibility.
Whilst companies currently accessing the RDTI can start considering the potential impacts of specific changes, we offer the observation that these changes will likely require extended review and consideration, as indicated by initial government commentary and prior examples of attempted RDTI reform. Importantly, a key takeaway for interested business is that there is almost certainly going to be no impact for RDTI claims in the short-term.
The 2026-27 Federal Budget announcement, to be delivered by Treasurer Jim Chalmers on 12 May 2026, will provide the next fascinating insight into the potential next steps and the Government’s planned response for Australia’s R&D and Innovation landscape.
We're already working with clients to assess exposure to the proposed changes, so if you'd like a tailored view of how these reforms could affect your R&D program, please get in touch.