Two of Australia’s peak business bodies have welcomed the federal government’s response to its Strategic Examination of Research and Development (SERD), but the Australian Industry Group (AiGroup) has raised sharp objections to a proposal it says will actively reduce the business R&D investment the report itself identifies as critically low.
The Business Council of Australia (BCA) offered broad support for the Ambitious Australia: SERD Final Report, saying its recommendations provide a clear pathway to lift productivity and attract investment. CEO, Bran Black, said the report’s release was well-timed ahead of the federal Budget.
“With productivity front and centre in the upcoming Budget, many of this report’s recommendations are a no-brainer,” Black said. “Taking them up would help lift investment, drive productivity and improve living standards.”
The BCA has long advocated for reforms to the Research and Development Tax Incentive (RDTI), and Black said several of the report’s proposals go directly to those concerns, including removing the $150 million cap on eligible expenditure, streamlining administration and scrapping R&D intensity measures.
Research commissioned by the BCA, Atlassian and Cochlear found a targeted reform package could return around $5 in economic value for every $1 of government expenditure over the next decade.
The AiGroup was also broadly supportive of the report but drew a hard line at one specific government proposal: raising the minimum R&D expenditure threshold under the RDTI from $20,000 to $150,000.
AiGroup CEO, Innes Willox, said the change was never canvassed in any issues paper, raised in public consultation or discussed at roundtables conducted during the review process.
“It now appears as a policy proposal without obvious analysis or justification,” Willox said. “A significant number of Australian Industry Group members currently accessing the R&D Tax Incentive could lose eligibility under the government’s proposal. This decision will reduce business expenditure on R&D, not increase it, which is the opposite of what the report calls for.”
Willox also criticised the government’s proposed substitute for smaller businesses losing access to the RDTI, a $150,000 competitive grant to partner with a university, describing it as showing “a complete and fundamental lack of understanding of how to help SMEs increase their levels of R&D”.
The stakes are significant. Australia’s productivity growth has fallen from 1.2 per cent annually before the pandemic to just 0.2 per cent, and both groups agree that lifting business R&D investment is one of the most direct levers available to reverse that trend.
Business investment in R&D has declined over the past decade while international competitors have increased support for local innovation.
AiGroup also flagged concern that the government’s response leaves the commercialisation and translation gap largely unresolved, with IP pathways, translation-focused funding and industry engagement mechanisms deferred to possible future National Strategic Initiatives.
Both groups welcomed commitments to a national innovation strategy, streamlined grant programs, stronger university-industry collaboration and a production tax credit for advanced manufacturing R&D and innovation activities.
The BCA said it would continue working with government and industry on policy settings to encourage innovation and economic growth. AiGroup called for immediate consultation with industry on the RDTI threshold change before it proceeds, saying the proposal threatens to undermine the broader work of the SERD panel.
