Before the Budget: What the Ambitious Australia RDTI Recommendations Might Actually Cost
Authors: Matthew McLean, Shaun van Dijk
The Ambitious Australia report, released by the government in March 2026 following its Strategic Examination of Research and Development, contains twenty recommendations spanning R&D governance, the R&D Tax Incentive (RDTI), collaboration programs, and the broader innovation funding landscape. The Budget on Tuesday 12 May is the first real test of how seriously the government is to act on the ideas and reforms proposed.
Drawing on ABS research expenditure data, the ATO’s R&D tax transparency publications, program statistics where available, and inferences from our own advisory work with companies accessing government R&D funding, we have attempted to come up with some illustrative orders of magnitude of what the RDTI-focused measures might cost or save.
Removing the $150 million cap
The RDTI currently caps eligible R&D expenditure at $150 million per entity. Above that threshold, additional R&D generates no further offset entitlement. The policy rationale, that large companies do not need a government subsidy to do R&D, has intuitive appeal.
But the ATO’s R&D tax transparency data for 2022-23shows that only two companies in the country actually hit the cap. These were Atlassian, with approximately $220 million in eligible R&D expenditure, and Fortescue, at around $151 million. Based only on this information, the fiscal cost of removing the cap entirely, giving those two companies the offset on their expenditure above $150 million at the floor intensity rate of 8.5%, is approximately $6 million per year. Not much in a program that costs around $4.6 billion annually.
What the cap does potentially do is send a signal to globally mobile, high-intensity R&D businesses that, beyond a certain scale, this country’s innovation policy stops rewarding you. Other R&D intensive companies like Cochlear ($137 million), CSL ($112 million), and ResMed ($107 million), are within $50 million of the threshold. As their R&D programs grow, the cap might become an active disincentive to locating that expenditure in Australia rather than in jurisdictions with no equivalent ceiling.
The cap was introduced in 2021. Removing it now would not cost much annually, affect a handful of companies today, and send a clear signal to the next tier of high-intensity R&D investors approaching the threshold. Potentially an easy win to justify?
The collaboration premium
Australia’s universities invested nearly $14 billion in R&D in 2022, making higher education the second largest R&D performer in the economy. Yet business funds contributed just $730 million of that,3.5% of what Australian businesses spent on R&D in the same period. This indicates less than four cents in every dollar of business R&D flowed toward collaborative university research.
The Ambitious Australia report recommends a collaboration premium, an additional loading on the RDTI offset for R&D expenditure conducted in partnership with a university or publicly funded research organisation. The 2016 RDTI review proposed a 10 percentage point premium for these research collaborations. Using that as a reference point and 43.5% as a central case for the current effective offset rate, the premium could potentially lift the tax offset available for collaborative R&D to 53.5%.
This would mean a business spending $5 million on R&D contracted to a university would see its offset rise from $2.17 million to $2.68 million, an additional $500,000 that materially improves the economics of collaboration relative to keeping the work in-house or using a private contractor.
The fiscal cost of this measure depends on what share of the $730 million currently flowing to universities is structured as eligible contracted R&D, as distinct from endowments and other business funding which the RDTI does not cover. If you estimate that roughly half, or around $365 million, meets that description, a 10% premium on that base will cost the budget approximately $37 million annually. If the premium works as intended and doubles the eligible contracted R&D base to around $730 million, the annual fiscal cost rises to approximately $73 million, and Australian universities would be receiving an additional $365 million in industry-funded contracted research.
Against the $14 billion higher education R&D base, that represents a 2.6% uplift meaning the premium is an incentive at the margin, not a structural solution to the collaboration gap on its own.
The measure has sat on the shelf since the 2016 review but could be another win with no major additional administrative or compliance burden resulting for claimants.
Quarterly advance payments
Under the current system, a company that spends on R&D activity throughout the year, lodges its tax return several months after year end, and waits for the ATO to process and pay the offset. From first dollar spent to cash received, the lag can be fifteen months or more. For a truly R&D intensive company managing its funds, that is an important cash flow constraint that shapes how much R&D the company can afford to undertake.
A market of specialist R&D financiers has emerged to advance the offset to claimants ahead of the ATO payment. Quarterly payments would deliver the same outcome through the program itself.
The ATO would pay earlier, and likely somewhat more in aggregate, because companies completing R&D cycles faster would generate additional eligible expenditure. That is the point. A company spending $2 million on R&D has an annual offset entitlement of around $870,000 at a 43.5% effective rate. Receiving that quarterly rather than fifteen months into the spend cycle means the cash is back in the business to spend on the next experiment.
The main fiscal consideration is the transition year. Introducing quarterly payments would bring forward a cohort of payments that would otherwise have arrived the following year. Given the size of the RDTI program, that bridging cost would be significant. A phased rollout, perhaps starting with smaller claimants, would spread that impact and give the ATO time to refine its processes.
Raising the minimum expenditure threshold
The Ambitious Australia report recommends raising the minimum R&D expenditure threshold from $20,000 to $150,000. The stated rationale is that small claims impose compliance costs on companies and processing costs on the ATO that are disproportionate to the offset value involved.
An analysis of theATO’s 2022-23 R&D tax transparency datashows that of the 12,956 companies that claimed the RDTI in 2022-23, some 3,099 (23.9% of all claimants) had R&D expenditure below $150,000. Their combined R&D expenditure was approximately $255 million, representing just 1.6% of the program’s total expenditure base.
The saving is real, but it would also mean one in four RDTI participants losing access to the program entirely. The argument for simplification has merit, but $150,000 represents an aggressive new entry point.
In our experience advising claimants of various sizes, companies with R&D expenditure below around $50,000 are often counselled to self-lodge as the cost of fees consumes a disproportionate share of the offset value. In other words, there is a market-imposed floor in practice already. It is also worth noting that small claims tend to carry specific compliance risks. Companies at this stage frequently have R&D expenditure that includes payments to directors or related parties, which require careful eligibility analysis regardless of the dollar amount involved. As a result, in our view a higher legislative floor has merit, the question is where to set it.
The fiscal calculation also changes materially depending on what replaces the RDTI for excluded companies. The Ambitious Australia report proposes collaboration vouchers, for businesses ineligible for the RDTI to conduct R&D with a university or research organisation. If even 30% of excluded companies accessed an average voucher of $75,000, the replacement cost would be around $70 million, reducing the net saving. If the voucher program is well-subscribed, the government is essentially paying similar money through a different channel.
The Budget on 12 May will help us understand whether Ambitious Australia is a genuine policy agenda or another review to file alongside its predecessors. If you want to understand how any of these measures would affect your R&D program specifically, we would welcome a conversation.