After a year‑long strategic review, the Federal Government has received a sweeping set of recommendations that could reshape how small and medium enterprises, startups and entrepreneurs access funding, talent, tax incentives and growth capital.
Why was the Ambitious Australia: Strategic Examination of R&D report commissioned?
The Strategic Examination of Research and Development was commissioned by the Australian Government in response to growing concern about Australia’s long‑term economic outlook. Successive Intergenerational Reports have shown declining projections for income growth and living standards, while Australia’s business investment in R&D has lagged behind comparable economies for more than a decade. Despite world‑class research institutions, Australia has struggled to turn ideas into scalable businesses, new industries and high‑value jobs.
The Government asked an independent expert panel to take a hard look at the entire R&D system and recommend reforms capable of shifting Australia’s growth trajectory, not through small tweaks, but through coordinated, structural change.
Who wrote the Strategic Examination of R&D report?
The report was written by an independent expert panel chaired by Robyn Denholm, a senior business leader with deep experience in global technology and innovation. The panel brought together expertise from industry, research, investment and public policy, and conducted extensive consultation across businesses, universities, startups, investors and government agencies throughout 2025.
Importantly for SMEs and founders, the panel approached the task with an explicit focus on economic impact (not just academic excellence) and on how private‑sector innovation can be better supported and scaled in Australia.
What problems did the the panel uncover?
The panel was blunt in its diagnosis. Australia’s R&D system is described as fragmented, overly bureaucratic and spread too thin to create meaningful impact. There are more than 150 Commonwealth R&D programs, many overlapping, poorly coordinated and difficult for small businesses to navigate.
For SMEs and startups, the problems are familiar:
- Accessing support is complex, time‑consuming and uncertain.
- Grants often don’t cover the full cost of R&D.
- The R&D Tax Incentive is critical but has become administratively burdensome and poorly targeted.
- Most R&D funding still flows to inputs, not outcomes, which rewards activity rather than commercial success.
- Australia lacks enough large, R&D‑intensive firms to anchor innovation ecosystems and pull smaller companies through supply chains and procurement.
The panel also highlighted gaps in venture and growth capital, workforce capability, industry‑PhD pathways, and the erosion of Australia’s manufacturing and sovereign production capacity.
What changes are being suggested by the Ambitious Australia report?
The report recommends a system‑wide reset, with reforms that would matter directly to founders and growing businesses.
At the centre is a proposal to reorganise national R&D effort around six National Innovation Pillars, aligned to areas of existing strength and global opportunity, such as health, energy, resources and advanced technology. These pillars would drive focus, scale and coordination across funding, regulation and investment.
For businesses, the most significant proposals include:
- Reforming the R&D Tax Incentive to make it simpler, more growth‑focused and more internationally competitive.
- Creating a premium RDTI pathway for startups, including more certainty and potentially earlier access to support.
- Raising thresholds and reshaping incentives to reward ambitious SMEs that reinvest in growth, rather than low‑growth firms.
- Expanding support beyond pure R&D to include translation, commercialisation and product development.
- Establishing new funding pathways for businesses that are ineligible for the RDTI but want to start innovating.
- Using government procurement to preference Australian R&D‑active firms, under an “if not, why not” model.
The panel also calls for better access to early‑stage grants, improved investor incentives, reforms to angel and venture capital settings, and stronger pathways linking universities, startups and industry.
What happens next with the Strategic Examination of R&D recommendations ?
The report itself does not implement reform, but instead sets out a roadmap. The recommendations will now move into a policy consideration phase within Government, where decisions will be made about timing, sequencing and Budget impact.
Some proposals could be implemented relatively quickly, such as administrative simplification of the RDTI or pilot programs under new innovation pillars. Others, particularly tax reform, procurement change and governance reform, will require legislation, intergovernmental coordination and sustained political commitment.
The panel is clear that partial adoption will not be enough. The recommendations are designed to work as a package, with each reform reinforcing the others.
What changes to Australia’s R&D system are likely to be seen?
In practical terms, SMEs and startups should expect intensified policy focus on innovation, productivity and commercial outcomes. The Government now has a strong evidence base to justify reform, particularly where existing programs are underperforming.
While not all recommendations will be adopted immediately, the direction of travel is clear: fewer, larger and more focused programs; stronger incentives for growth‑oriented businesses; closer integration between research and industry; and greater scrutiny of whether public investment is delivering economic results.
For founders and entrepreneurs, the report signals opportunity but also change. Programs may be reshaped, eligibility tightened, and expectations lifted. The message from the panel is unambiguous: Australia wants fewer small innovators stuck in grant dependency, and more firms scaling into globally competitive businesses.
If the Government acts on these findings, the next few years could mark the most significant overhaul of Australia’s innovation system since the 1990s, with SMEs and startups firmly at the centre of the national growth story.
Want to learn more about the R&D Tax Incentives and Grants?
Fullstack Advisory specialises in helping SME, startups, and entrepreneurs secure funding and scale impact. Book a free consultation today with our R&D Grants consultants to get expert guidance on your grants and incentives applications and maximise your chances of success.
