The Australian Government’s Ambitious Australia – Strategic Examination of Research and Development report, was released on 17 March 2026 and sets out a long‑term reform roadmap for Australia’s innovation system.
While the report spans funding, governance and workforce capability, its recommendations have significant implications for tax policy, particularly the future design of the Research and Development Tax Incentive (RDTI).
For businesses investing in innovation—and the advisers who support them—the report signals a clear shift away from broad‑based access towards a more targeted, outcomes‑focused tax incentive regime.
Re‑positioning the R&D tax incentive
A central finding of the report is that Australia’s business R&D investment has been declining relative to comparable OECD economies. The report concludes that, while the RDTI remains a cornerstone of innovation support, it is no longer delivering sufficient impact in its current form.
Key tax‑related recommendations include:
- Simplification of the RDTI, including measures to improve certainty and reduce compliance complexity for eligible taxpayers.
- Re‑design of eligibility thresholds and rates to better align support with innovation outcomes rather than aggregate R&D spend.
- Differentiated incentive streams, recognising the differing needs of start‑ups, scale‑ups, SMEs and large corporates.
From a tax perspective, this suggests future reforms may materially alter who qualifies, how benefits are calculated, and the degree of reliance that can be placed on the RDTI as a funding mechanism.
Targeted support for high‑growth and early‑stage companies
The report recommends a stronger focus on high‑growth and innovation‑intensive businesses, including early‑stage companies with strong commercialisation potential.
Tax‑relevant proposals include:
- Enhanced refundable offsets for qualifying early‑stage or high‑growth businesses, potentially delivered at 23.5% above the current corporate tax rate (currently 18.5%).
- Time‑limited access to premium RDTI support (3 years) with continued eligibility linked to demonstrable growth or commercial milestones.
- Broader recognition of eligible activities and expenditure connected to commercialisation, deployment and user testing.
These proposals would represent a significant evolution of the RDTI, with increased emphasis on economic outcomes rather than purely technical R&D definitions—raising new considerations for tax structuring, documentation and risk management.
Changes affecting SMEs and large corporates
For more established businesses, the report proposes recalibration rather than expansion of support.
Notable tax‑focused recommendations include:
- Adjusting turnover thresholds for tax offsets.
- Reconsidering caps and intensity measures that currently limit benefits for larger R&D performers.
- Removing certain structural features that reduce the cash‑flow value of the incentive, including interactions with franking credits.
These changes could materially affect the after‑tax value of R&D investment decisions, particularly for large corporates and multinational groups managing Australian R&D hubs.
Complementing tax incentives with direct support
Importantly, Ambitious Australia does not view the RDTI in isolation. The panel recommends a more balanced innovation support mix, combining tax incentives with direct grants, procurement‑based support and commercialisation funding.
For tax practitioners, this reinforces the need to:
- Consider the interaction between tax offsets, grants and subsidies, including integrity rules and clawback risks.
- Monitor how new production or commercialisation incentives may sit alongside existing tax regimes.
- Advise clients on structuring innovation programs to optimise outcomes across both tax and non‑tax support mechanisms.
- Introduce a production tax credit for advance manufacturing resulting from RDTI activities that remain in Australia.
Encouraging capital investment into innovative companies
The panel also recommends an expansion of Early Stage Investment Company (ESIC) tax incentive and Early Stage Venture Capital Limited Partnership (ESVCLP) incentives
Expansion could include
- Allow more companies to qualify for ESIC buy allowing expanded age up to 5 years old and lift cap of $1 million expenses across 3 years.
- Reform definition of wholesale and sophisticated investor
- Expanding ESVLCP incentives to increase fund caps to $500 million
The report goes much further than tax incentives and grants and we encourage interested readers to consider the actual report: Ambitious Australia – Strategic Examination of R&D Final Report. With a Federal Government Budget approaching and speculation of tax reform, we hope that Research and Development is considered as part of a broad tax reform package.
How Exant Advisory can help
Our tax advisory team supports companies to plan and apply for the current R&D tax incentive. If you require assistance with the R&D tax incentive contact your usual Exant Advisor, or alternatively contact our Tax Partner, Jamie Towers via the form below or on 07 3218 3900. You can also visit our website to view our full range of R&D tax incentive services here.
