Home » News » Swanson Reed Submission to Review of National R&D System – April 2025

Swanson Reed Submission to Review of National R&D System – April 2025

In the May 2024 federal budget, The Albanese Government announced a strategic examination and review of Australia’s R&D system to align it with national priorities and improve outcomes.

The Government subsequently announced that the review would be led by Robyn Denholm, Chair of Tesla and an experienced leader in R&D at some of the world’s most innovative companies; the review panel also includes:

• Emeritus Professor Ian Chubb AC, former Chief Scientist and Vice-Chancellor of the Australian National University.
• Professor Fiona Wood AO, pioneer of spray-on skin technology and former Australian of the Year.
• Dr Kate Cornick, CEO of LaunchVic and advocate for Australia’s startup ecosystem.

The terms of reference announced by The Government note:

The panel will consider opportunities to:

• Maximise the value of existing investment in R&D, across government, universities, philanthropy and industry.
• Strengthen linkages between research and industry, enabling greater mobility of researchers and innovators between sectors and addressing barriers to meaningful collaboration.
• Support the achievement of national priorities, including mechanisms to improve coordination and impact of R&D funding and programs across Government and through our science agencies.
• Drive greater R&D investment by industry, and boost industry adoption of innovation.
• Uplift Australia’s overall R&D intensity.

In doing so, the panel will examine: 

• The current state of Australia’s R&D system, and comparable state of OECD investment in R&D, including levels of investment in R&D, R&D infrastructure and R&D workforce, across sectors.
• Barriers and risks impacting on Australia’s capacity to maintain R&D competitiveness.
• Ways to better measure the value and impact of R&D investments, and maximise efficiencies.
• Ways to ensure R&D benefits are equitably distributed across regions and communities.

Swanson Reed has recently completed our 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.