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R&D Tax Policy Discussions Leading into The Government’s Productivity Roundtable

Treasurer Jim Chalmers will convene The Government’s Economic Reform Roundtable in Canberra from 19–21 August 2025 with a focus on enhancing Australia’s lagging productivity.

The Roundtable will occur at a time whilst a Strategic Examination and Review of Australia’s R&D system (led by Robyn Denholm) is underway and possibly due to report later in the year.

Recent media coverage has suggested that businesses may be looking to discuss the R&D Tax Incentive at the August Roundtable:

• The AFR has recently reported:
  • • Big businesses including Atlassian and Cochlear are calling on the government to expand research and development tax incentives for large firms to address the staggering drop in investment and productivity;
    • A Business Council of Australia commissioned report has suggested broadening the R&D tax incentive for large businesses, additional tax incentives for collaboration and commercialisation of R&D and simplifying administrative processes.
• The Australian has recently reported:
  • • Co-founder of technology giant Atlassian, Scott Farquhar, will lobby the government for a $1.4bn research and development tax incentive for business, with support from medical technology giant Cochlear and The Business Council of Australia;
    • Former Industry and Science Minister Ed Husic has rejected calls to ramp up tax breaks that encourage businesses to undertake R&D, saying: “I don’t need a tax incentive to brush my teeth”;
• InnovationAus has recently reported:
  • • Australia could reap more than $7 billion each year by reforming uncompetitive R&D tax settings, according to new economic modelling commissioned by the Business Council of Australia, Atlassian and Cochlear;
    • Scientists who have called for levies on big businesses that underinvest in R&D have also found that changes to tax settings would boost productivity by 0.1 per cent each year over the next 10 years.

Swanson Reed supports discussion around maintaining or expanding a stable and generous R&D Tax Incentive, however any reform to the R&D Tax Incentive may not be able to materialise from the August Roundtable, and The Government may await the findings of the Strategic Examination and Review of Australia’s R&D system.

Consultation for the Strategic Examination and Review of Australia’s R&D system closed in April, and we understand that the expert panel may deliver the action plan of recommendations to government later in the year.

Swanson Reed made a submission to the review and some key extracts from the Swanson Reed submission are noted below:

• Our submission will focus specifically on the R&D Tax Incentive, which is the most important and significant means of government support for business investment in R&D.
• Swanson Reed is concerned that the R&D Tax Incentive has been criticised for not being ‘fit for purpose’ and having blame disproportionately directed towards it for poor levels of Australian business investment in R&D Activity. We are steadfast in our view that any proposals to change the R&D Tax Incentive arising from this review must not change its fundamental model of being a broad-based, self-assessed, entitlement system governed by criteria enshrined in law.
• While the tightening of the R&D Tax Incentive programme through increased regulatory scrutiny and more restrictive guidance may have contributed to a reduction in Business Expenditure on Research and Development (BERD), it is important to recognise that such changes were not necessarily an indictment of the programme itself. The tightening measures were a justified response to instances of misuse as regulators aimed to prevent exploitation of the system. Although this was seemingly a necessary step in refining the programme, it is crucial that the programme does not become overly restrictive in a way that stifles genuine innovation and R&D.
• To be clear, we support the role of the programme regulators (ATO and AusIndustry) and the vital function they play in maintaining integrity to promote sustainability of the programme. We also acknowledge that throughout the history of the R&D Tax Incentive programme there has been mischief (on the part of claimants and tax advisors) that required strong action. We furthermore have no material difference of opinion with the guidance on eligibility released by the programme regulators in recent years. However, it would not be a controversial position to state that the R&D Tax Incentive programme has progressively tightened over its history, and that a claim submitted under effectively the same law in FY2011-12 would be subjected to a considerably narrower interpretation of what is eligible R&D activity and expenditure in FY2024-25.
• It also seems that whenever the cost of the R&D Tax Incentive is reported as increasing, it is perceived in a negative light. However, if increasing business investment in R&D is a government policy objective, an increase of R&D expenditure under the programme (and, by extension, the programme’s cost) should be viewed positively. Instead, upon reports of increased R&D Tax Incentive Programme Cost in recent years, discussion seemingly turns to potentially capping, cutting or changing the programme as a reflex. Given this attitude towards the R&D Tax Incentive, is it a surprising outcome that business expenditure on R&D has declined?
• Public pressure on R&D Tax Incentive utilisation by certain companies and industries detracts from the broad-based element of the programme. This may support calls by some to divert funding from a broad, market-based, self-assessment programme to a grant-based system that is assessed based on government-identified areas of strategic priority. In our view, moving towards a grant-based system at the expense of the R&D Tax Incentive would be a grave mistake for various reasons, including:
  • Companies must be empowered to make their own project decisions…
  • Speed of Access to Funds…
  • Increases to cost of Administration…
• Whilst we support the stability of the R&D Tax Incentive, there are a few relatively minor adjustments that could enhance its effectiveness, including:
  • An increase in the turnover threshold for the Refundable offset…
  • An increase to the R&D Expenditure Cap…
  • Collaboration Premiums…
  • Stability Provisions or undertaking…

The full copy of our submission may be released on the government website in due course.

Please get in touch with our office if you require assistance, would like to speak to someone about a potential claim, or check out our website for more information.