A sweeping government review of Australia’s research and development system has placed agriculture and food production among the nation’s six highest innovation priorities – with significant changes to tax incentives, manufacturing support and R&D funding set to reshape how food and beverage companies invest in innovation.
The federal government’s Ambitious Australia: Strategic Examination of R&D final report, released in December 2025 and chaired by Tesla board chair Robyn Denholm, delivers 20 recommendations designed to reverse a decade-long decline in business R&D investment and reorient Australia’s innovation system around sectors where it has genuine competitive advantage.
For food and beverage manufacturers, the report’s implications are far-reaching – from how they access the R&D Tax Incentive (RDTI), to new tax credits for keeping manufacturing onshore, to the formal elevation of “Agriculture and Food” as one of only six National Innovation Pillars anchoring the entire reform package.
Agriculture and Food elevated to national priority
The report recommends consolidating all national R&D effort into six National Innovation Pillars:
- Health and Medical;
- Agriculture and Food;
- Defence;
- Energy and Environment;
- Resources; and
- Technology.
Each pillar will be anchored by a long-term national goal and supported by dedicated governance, funding and a National Strategy Advisory Council (NSAC).
The inclusion of Agriculture and Food alongside defence and health signals the government’s recognition that Australia’s food production sector – which contributes significantly to the country’s export revenue – must be at the centre of its innovation agenda, not its periphery.
Critically, each pillar will be delivered through National Strategic Initiatives (NSIs) – collaborative partnerships between government, universities, research agencies, startups, SMEs and large businesses. NSIs will fund applied research, proof-of-concept grants, pre-accelerator programs and industry PhDs, providing food and beverage companies with structured pathways to engage with cutting-edge research.
The 15 rural Research and Development Corporations (RDCs) – which have historically driven R&D across key agricultural commodity sectors – will be required to align closely with the Agriculture and Food pillar. The panel has flagged that consolidation of RDCs should be explored to reduce operational costs and maximise funding directed to actual R&D activities, a move that may prompt structural change across the rural R&D landscape.
CSIRO, as Australia’s largest publicly funded research agency, is to be repositioned as a core contributor to the pillars – with sustained and targeted funding to support that role. For food and beverage manufacturers, this means a more industry-focused CSIRO with clearer pathways for collaboration.
RDTI reform: What manufacturers need to know
The RDTI, which accounts for approximately 30 per cent of all Commonwealth R&D funding, is central to the panel’s business incentive reforms – and the proposed changes have direct implications for food and beverage companies of all sizes.
The panel found the scheme is widely regarded as administratively complex, with 86 per cent of businesses relying on R&D tax consultants to access it. The report recommends simplifying administration and refocusing the RDTI for greater impact.
Key changes proposed include raising the minimum R&D project expenditure floor from $20,000 to $150,000, which will redirect support toward companies conducting more substantive R&D programs rather than small-scale activities. The panel recommends that businesses no longer meeting the threshold be supported through a new R&D collaboration voucher program – offering grants of up to $150,000 for companies to conduct R&D in partnership with a university or research institution. This is a material opportunity for small and mid-size food manufacturers who want to begin their R&D journey with lower risk.
For growing manufacturers, one of the most significant changes is the proposal to raise the turnover threshold for the refundable R&D tax offset from $20 million to $50 million. This directly addresses a well-known pain point for scaling food and beverage companies, where the current cliff-edge at $20 million turnover abruptly removes cash flow support at a critical growth stage. The report notes that around 80 per cent of businesses classified as medium-sized by the ATO generate less than $50 million in turnover – many of them manufacturers.
The panel also recommends removing clawback provisions in the RDTI, which currently penalise companies that receive government grant funding by requiring them to repay RDTI benefits. This change will allow food manufacturers to stack NSI grants with RDTI claims without risk.
New production tax credit to keep manufacturing in Australia
One of the most consequential recommendations for food and beverage manufacturers is Recommendation 7 – a new production tax credit or subsidy for advanced manufacturing resulting from R&D activities that remain in Australia.
The panel was explicit that too many Australian businesses are being pushed offshore by cost pressures, and that retaining high-value manufacturing and sovereign production capability requires tangible incentives. A production-based credit – complementary to the existing Future Made in Australia framework – would reward companies that commercialise their R&D domestically, covering local fabrication, technology integration and workforce development.
For food and beverage manufacturers already investing in product innovation and process technology, this credit could meaningfully reduce the cost of scaling production in Australia versus offshoring.
Business R&D investment is falling
The report presents a sobering picture of Australia’s R&D trajectory. Business expenditure on R&D has fallen to just 0.9 per cent of GDP – less than half the OECD average of 1.99 per cent and down 31 per cent since 2009. Australia ranks 105th out of 145 economies for economic complexity and has one of the lowest manufacturing shares in the OECD.
The panel found that the RDTI induces additional R&D investment most effectively in the manufacturing and services industries – meaning food and beverage manufacturers are among the business types most likely to respond to improved incentives. The research also shows Australian firms with novel innovations have 1.6 times higher labour productivity than those with only incremental innovations, and 1.7 times higher than firms with no innovations. For a sector under intense pressure from cost inflation and global competition, that productivity differential is significant.
A ‘front door’ for industry engagement
A key practical benefit for manufacturers under the new system will be improved access to the research ecosystem. Each National Strategic Initiative will provide a dedicated “front door” for industry to engage with the national Agriculture and Food pillar – facilitating connections with universities, publicly funded research agencies, state government programs and investors.
NSIs will also manage proof-of-concept schemes and accelerator programs specifically focused on high-impact challenges within the pillar.
For food and beverage companies that have historically found it difficult to navigate Australia’s fragmented R&D support landscape – the report identifies more than 150 Commonwealth programs across 13 ministerial portfolios – this represents a significant simplification.
What’s Next
The panel has called for immediate government action to implement its recommendations as an integrated package, noting that cherry-picking reforms will deliver only incremental outcomes. The first phase focuses on fixing the system through governance reform, reversing the decline in research funding and reforming business incentives, including the RDTI changes outlined above.
The full report is available at industry.gov.au/StrategicR&D.
