The Ambitious Australia review was commissioned to reverse Australia’s long-running decline in R&D investment. The report is blunt about the current system. The panel describes it as underperforming and characterised by incremental improvements, risk aversion and fragmented funding.
The RDTI constitutes the largest portion of federal support for business R&D, representing approximately 30 per cent of all Commonwealth R&D funding. In 2022–23, 12,956 companies claimed a combined $16.2 billion in R&D expenditure under the scheme. The proposed reforms would reshape who has access, on what terms and at what scale.
The scale of the proposed minimum expenditure increase from $20,000 to $150,000 deserves close attention. We reviewed the ATO’s R&D Tax Incentive Transparency Report for 2022–23, which covers 12,956 claimants for that income year.
When broken down further, 822 entities (6.3%) reported expenditure below $50,000 and a further 1,254 (9.7%) fell between $50,000 and $100,000. Another 1,100 (8.5%) fell between $100,000 and $150,000, meaning a significant number of businesses sit just below the proposed new threshold.
A higher threshold will intentionally focus the scheme on businesses that have committed investment to direct to R&D. However, this needs serious further thought. A jump from $20,000 to $150,000 is sevenfold. It will remove access for businesses that are in early startup phases, building their R&D capability, or running lean development teams. Many software companies with modest internal development costs will be caught. So will early-stage hardware and manufacturing businesses that are still proving their concepts to even support seeking external investment. The report proposes an R&D collaboration voucher program for businesses that fall below the threshold, but the detail of that mechanism remains to be seen and to have any value in softening the impact would need to be in place at the same time any minimum R&D expenditure threshold was introduced.
The proposed premium stream could be transformative for well-backed startups. Quarterly cash advances, a higher offset rate and expanded eligible expenditure covering commercialisation are all substantial improvements. Eligibility would be determined by a 100-point style test looking at factors such as venture capital backing from a qualified investor, participation in approved accelerator programs, intellectual property rights and university collaboration.
There is a lot to like here, but there is also a practical concern worth flagging. Quarterly cash advances could disrupt the existing R&D lending market. Many startups currently use specialist R&D lenders to bridge the gap between lodgement and refund. If quarterly advances become available for a subset of eligible claimants, the commercial rationale for R&D lending may shift. Lenders may reassess their risk appetite or tighten their lending criteria if the most creditworthy borrowers move to quarterly government payments. Businesses that do not qualify for the premium stream and continue to rely on R&D finance should be aware that the lending landscape may change as a result.
It is also worth noting that the 100-point test may favour startups with institutional connections. Startups that are bootstrapped, self-funded, or operating outside the venture capital ecosystem may not score well, even if their R&D is technically strong and commercially promising. That creates a potential equity issue that will need to be addressed in the design detail.
This is a welcome proposal for scaling businesses. The current $20 million turnover cap for the refundable offset has been a long-standing frustration. Businesses that are growing successfully and investing heavily in R&D lose access to cash refunds precisely when they are scaling up. The ATO defines medium businesses as those with turnover between $10 million and $250 million, and the report notes that around 80 per cent of these have turnover below $50 million. Lifting the threshold to $50 million would capture a large share of the growth cohort the scheme is intended to support.
The panel proposes that ongoing eligibility for the refundable component be linked to average annual revenue growth of at least 5 per cent above CPI over a preceding three-year period. Businesses that fail this benchmark for two consecutive years would lose access to refundable benefits. There is a three-year on-ramp before the condition kicks in.
This is a clear statement that the RDTI is being repositioned away from businesses that claim year after year without growth – a significant shift from the policy underpinning the current program. It will reward businesses that use R&D to drive real commercial outcomes. But it will be challenging for businesses operating in sectors with longer development cycles (e.g. pharmaceutical companies), cyclical markets or irregular revenue profiles. It is our view that more analysis needs to be done to determine the significant impact that this reform could have on our Life Sciences sector and consideration needs to be given to excluding industries that typically have longer development cycles.
This is a clear statement that the RDTI is being repositioned away from businesses that claim year after year without growth. It will reward businesses that use R&D to drive real commercial outcomes. But it will be challenging for businesses operating in sectors with longer development cycles (e.g. pharmaceutical companies), cyclical markets or irregular revenue profiles.
The removal of the ATO clawback power and the $150 million R&D expenditure cap have been sought by industry for some time. Removing clawback means businesses that succeed in obtaining public grant funding will not face the risk of having offset benefits recovered. Removing the expenditure cap would allow larger firms to claim on the full scale of their Australian R&D investment, making Australia more competitive for multinational R&D allocation decisions.
We are in full support of maintaining the integrity of the RDTI. The scheme involves significant public expenditure and it is right that there are robust mechanisms to ensure claims are legitimate and well-founded. That is not in question.
What we would challenge is whether the current compliance framework, and the direction it has been heading, is proportionate to that objective. When a significant number of claimants describe the scheme as difficult to navigate without external assistance, that points to a design issue rather than a capability issue on the part of the businesses themselves.
The lived experience of claimants has been moving in the opposite direction to simplification. The DISR registration application form was substantially revised in August 2025. The current form runs to over 115 questions, including 15 free-text fields with a 4,000-character capacity and minimum character requirements on six of them. For each core R&D activity, applicants must provide detailed written responses covering the hypothesis, experiment design, evaluation methodology, conclusions, new knowledge generated and evidence maintained. A business registering two or three core activities with associated supporting activities faces a significant documentation exercise before it even gets to the tax return.
This sits within a dual-regulator model where DISR administers the registration process and the ATO administers the tax offset. Both agencies conduct compliance reviews and audits, and in practice claimants can face scrutiny from either or both regulators on different aspects of the same claim. The integrity measures introduced in recent years, while understandable in context, have added further layers of compliance complexity. For smaller claimants in particular, the compliance effort required to maintain a defensible claim can approach or exceed the commercial value of the offset itself.
None of this is an argument against integrity. It is an argument for smarter administration. Simplification of the scheme should extend to how it is administered, not just how it is legislated. The registration process, the dual-regulator model and the overall compliance posture all need to be part of that conversation. A regulator review model that overlays an appreciation of R&D activities in a real-world commercial context would also be welcomed.
Advisers and claim preparers should expect a material shift in client profile. If the minimum spend increases to $150,000, a significant portion of smaller engagements will fall away. Advisory work will likely concentrate around higher-value, more complex claims.
The Ambitious Australia report is a serious, detailed and well-considered piece of work. It reflects genuine thought about how Australia’s R&D system needs to evolve.
“At The Gild Group, we welcome the review and the ambition behind it. But the implications for all businesses need to be considered carefully.
Much of what is proposed is sensible and overdue. But a quarter of current RDTI claimants fall below the proposed minimum expenditure threshold. Many of those are early-stage businesses doing exactly the kind of work the scheme was designed to encourage. The transition needs to be managed with care, and the government must ensure that in pursuing strategic focus it does not shut the door on the next generation of innovative Australian companies before they have had a chance to grow. Equally, reform of the incentive must be matched by reform of how it is administered. Businesses should not face a simplified scheme wrapped in a more complex compliance framework.
