September 29, 2026
Treasury Consultation Hub, The Department of the Treasury
The Group of Eight (Go8) supports the Australian Government’s objective of strengthening Australia’s innovation system and encouraging greater business investment in research and development (R&D).
The Research and Development Tax Incentive (RDTI) remains one of Australia’s most significant policy mechanisms for encouraging private sector investment in innovation. Well-designed incentives can help businesses undertake riskier research, accelerate commercialisation and build new industries.
However, elements of the exposure draft Better Targeting the Research and Development Tax Incentive risk undermining these objectives. In particular, the proposed exclusion of supporting R&D activities and restrictions on access to refundable tax offsets would narrow support for legitimate R&D activity and reduce incentives for investment in sectors critical to Australia’s future economic growth.
The Go8 represents Australia’s leading research-intensive universities. Its members are central to the nation’s research, innovation and commercialisation system, undertaking research at a scale and quality unmatched elsewhere in the Australian university sector.
Go8 universities invest around $10 billion annually in R&D, generating new knowledge, developing advanced technologies and supporting Australia’s economic, social and national priorities.
This research strength is matched by a strong commercialisation record track record. In 2023, Go8 universities generated more than $93 million in commercialisation revenue, accounting for nearly 92 per cent of all university commercialisation revenue generated by Australian universities.
Go8 members also support more than 200 active start-up and spinout companies, collectively holding more than $280 million in equity. These companies are a critical pathway through which university research is converted into new technologies, products, services and high-value economic activity.
Yet, as the Go8 Decadal Roadmap to 3% of GDP identifies and reaffirmed in the Australian Government’s Ambitious Australia, Australia is falling behind our peers in R&D investment, particularly business investment.
Policy settings should lift our national research intensity, not restrict it.
The exposure draft risks working against that objective by limiting the range of eligible R&D activities and restricting refundable offsets to a narrower group of firms.
Recommendations
Recommendation 1
The Australian Government should retain eligibility for supporting R&D activities and instead simplify the claiming process in line with the recommendations of Ambitious Australia.
Activities directly associated with clinical trials, including clinical manufacturing, should be explicitly recognised as eligible R&D activities within the legislation.
Recommendation 2
The proposed age-based restrictions on access to refundable R&D tax offsets should not proceed.
At a minimum, firms in life sciences and therapeutic goods should be exempt from any age limit and the limit on other innovative start-ups and spinoffs extended to be at least 15 years, in line with the eligibility requirement proposed in the Innovative Business CGT Concession.
Recommendation 3
The Australian Government should enable eligible businesses under the R&D Tax Incentive to access an additional equity or debt finance incentive under the National Reconstruction Fund where they have entered into a formal R&D collaboration with Australian universities and research institutions, consistent with the recommendations of the Go8’s Decadal Roadmap to 3% of GDP.
Ensuring critical supporting activities are covered as part of the R&D Tax Incentive
One of the most significant concerns with the exposure draft is the proposal to exclude supporting R&D activities from eligibility under the incentive.
The Ambitious Australia report recommended simplifying arrangements for claiming supporting activities. It did not recommend removing these activities entirely.
Supporting activities are often an essential part of the innovation process. They include prototyping, trialling, testing and validation, manufacturing, and other downstream activities associated with scaling up from experimental stage. While these activities may not themselves involve experimental research, they are frequently necessary to enable, validate and commercialise that research.
Removing support for these activities would create uncertainty for businesses and reduce the overall effectiveness of the incentive in driving R&D investment.
The implications are particularly significant for clinical trials.
Clinical trials are a critical link between scientific discovery and the delivery of new medicines, devices and treatments. They are also costly, capital-intensive and internationally mobile. Companies routinely compare jurisdictions when deciding where trials will be conducted. Australia’s policy settings therefore have a direct influence on future investment decisions.
Under existing arrangements, supporting R&D activities can include the manufacture or preparation of medicines, therapeutic compounds and other products required for a clinical trial. While activities may not constitute experimental research in themselves, without them the trial cannot proceed.
The proposed reforms create uncertainty about whether these activities would continue to qualify.
As a result, substantial expenditure that is integral to otherwise eligible clinical trials could fall outside the scope of the incentive.
This would increase the effective cost of undertaking clinical trials in Australia and reduce Australia’s competitiveness as a destination for clinical research investment.
The legislation should therefore explicitly preserve eligibility for activities undertaken specifically for clinical trials, including associated developmental activities. Clarity in legislation is needed so companies and investors can make long-term decisions with confidence.
Weakening Australia’s clinical trials ecosystem would also disrupt the translation of university and medical research into patient and commercial outcomes.
The cap on the age of start-up and spinoff firms claiming refundable offsets must be abandoned
The proposed restrictions on access to refundable offsets based on the age of a company are also concerning.
Firms developing research-intensive technologies often remain pre-revenue or cash-flow negative well beyond their early years, particularly where commercialisation involves long development, demonstration, manufacturing or regulatory pathways. The 15-year concession for therapeutic goods acknowledges these issues in biotechnology and medical technology, but equivalent development timelines can also arise in areas such as quantum technologies, advanced manufacturing, robotics and space.
The age of a firm is a poor proxy for maturity and an even poorer measure of its need for innovation support.
Many companies continue investing heavily in R&D years after establishment and may not generate taxable profits for extended periods. In these circumstances, access to a refundable offset remains essential.
While the proposed 15-year concession for therapeutic goods acknowledges the realities of long development cycles, even this exemption may not go far enough.
Development periods from initial discovery through to clinical trials, regulatory approval and market entry can frequently extend beyond 15 years. During much of this period firms remain pre-revenue and therefore receive little or no benefit from a non-refundable tax offset.
Restricting refundable support based primarily on firm age risks penalising some of Australia’s most innovative and research-intensive businesses precisely because they operate in sectors characterised by lengthy development and commercialisation timelines.
Together these changes risk undermining Australia’s ambition to lift its R&D intensity
The proposed reforms should be assessed in the context of Australia’s broader innovation challenge.
The Go8 continues to advocate for Australia to increase national R&D investment to at least 3 per cent over the coming decade. While Ambitious Australia does not adopt a specific target, it recognises the need for a substantial increase in Australia’s innovation effort.
Australia’s R&D intensity has fallen significantly over the past two decades and now sits at around 1.7 per cent, compared with an OECD average of 2.7 per cent of GDP.
The primary driver of this decline has been a reduction in business investment in R&D.
Reversing this trend requires policies that encourage businesses to undertake and translate research in Australia. Capping the age of innovative capital-intensive firms and excluding some existing supporting R&D activities runs counter to this aim.
If Australia is serious about lifting business investment in research and innovation, policy settings must support more innovative firms through longer development cycles, not fewer.
University-industry collaboration will be a key driver to achieving Australia’s R&D and commercialisation ambitions
Stronger collaboration between universities and industry will be central to achieving Australia’s innovation and commercialisation ambitions.
Universities and businesses perform complementary roles across the innovation system. Universities generate foundational knowledge and specialised expertise, while businesses translate those discoveries into products, services and economic outcomes.
Stronger collaboration accelerates this process and increases the wider benefits generated by research investment.
The Go8 continues to advocate for additional incentives under an expanded National Reconstruction Fund remit to further incentivise businesses to collaborate with Australian universities and research organisations.
Ambitious Australia alsoidentifies university-industry collaboration as essential to converting Australia’s strong research base into economic and societal outcomes. Foundational research creates the knowledge and expertise on which innovation depends. To realise its full benefits, businesses, entrepreneurs and researchers must work together to translate knowledge into new goods, services and industries.
Collaboration gives smaller firms access to university expertise, specialised facilities and research networks, where they often lack the scale, capital or infrastructure to develop independently. Ambitious Australia raises the option of providing a collaboration voucher arrangement, demonstrating the report’s acknowledgement of the importance of ensuring better university-industry collaboration.
Conclusion
The Go8 supports the Government’s objective of strengthening Australia’s innovation system and welcomes many aspects of the broader reform agenda set out in Ambitious Australia.
However, reforms to the R&D Tax Incentive should ultimately be judged by whether they encourage greater business investment in R&D and commercialisation in Australia.
The proposed exclusion of supporting activities and the introduction of age-based restrictions on refundable offsets risk discouraging precisely the investment Australia needs more of.
At a time when Australia trails comparable economies in R&D intensity, policy settings should expand incentives for innovation, not narrow them.
Achieving the national ambition of increased R&D investment will require support for businesses throughout the commercialisation journey, stronger incentives for collaboration with universities, and recognition that many of Australia’s most promising innovations depend on long-term, capital-intensive development pathways.
The objective must be clear: to grow Australia’s innovation pipeline, strengthen business investment in research and accelerate the translation of discovery into economic and societal benefit.