Strategic Examination of Research and Development: discussion paper

Strategic Examination of Research and Development

ACCI Submission
17 April 2025
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Table of Contents
Executive Summary 1
Introduction 4
Part 1: What is Business R&D? 8
Aligning R&D definitions with real-world business practice 8
Making Australia’s R&D definition work for Australian businesses 8
Part 2: Incentives, funding and institutional reform 11
What are the most effective business incentives? 11
Aligning existing government initiatives with business needs 12
Part 3: Capability, access and workforce 20
Building relationships between SMEs and research institutions 20
Investing in workforce development 24
Conclusion 29
About ACCI 30

i ACCI Submission: Strategic Examination of Research and Development
Executive Summary
The Australian Chamber of Commerce and Industry (ACCI) welcomes the opportunity to contribute to the national conversation on reforming Australia’s R&D ecosystem. This submission outlines a pathway to unlock greater innovation and productivity by making research and development more accessible, relevant, and beneficial to the businesses that drive Australia’s economy—particularly small and medium- sized enterprises (SMEs). Our recommendations reflect deep engagement with industry and focus on five key themes:
1. Embedding R&D as a national economic imperative
ACCI calls for the Australian Government to embed R&D as a national economic priority, backed by stable, long-term and bipartisan policy commitment. Clarity and consistency in messaging are critical to catalyse private investment, mitigate commercial risk, and foster a collaborative innovation culture.
• Design and implement a national strategy for R&D.
• Establish a clear national objective for R&D with cross-sector alignment.
• Recognise the critical role of SMEs in national innovation, especially given that 97% of Australian
businesses have fewer than 20 employees.
• Ensure that R&D funding and support are predictable and structured for long-term industry
engagement, not tied to short political cycles.
2. Aligning R&D definitions with real-world business processes
Current R&D definitions and programs do not align with the real-world innovation pathways of Australian businesses, particularly SMEs and service-based sectors. ACCI urges a shift away from rigid, linear models of R&D towards more flexible definitions that recognise innovation-driven research and iterative development.
• Modernise the R&D definition to include commercial interpretations of innovation, especially in
software, fintech, and service industries.
• Recognise that innovation can trigger research, not just flow from it—capturing activities currently
excluded from support.
• Apply these shifts to the R&D Tax Incentive (R&DTI) as appropriate.
3. Aligning existing government initiatives with business needs
A targeted, flexible and reliable suite of incentives is needed to engage SMEs in Australia’s innovation ecosystem. While the R&DTI is central, it remains inaccessible for many businesses due to cashflow timing, compliance complexity, and outdated eligibility thresholds.
• Redesign the R&DTI to make it more responsive to SME needs (e.g. increase turnover
thresholds, simplify compliance, provide more immediate support) and take account of
modernised definitions of R&D.
• Lower the corporate tax rate to improve financial flexibility for businesses taking R&D risks.

1 ACCI Submission: Strategic Examination of Research and Development
• Foster the commercialisation of R&D and innovation in Australia through continued support for
and a broadening of the patent box to all industry sectors.
• Make the Instant Asset Write-Off permanent and increase the cap to $50,000 to encourage
investment in modern R&D equipment.
• Explore income-contingent loans for R&D, similar to HECS-HELP, to support innovation with
shared public-private risk.
• Reintroduce the Small Business Technology Investment Boost and Skills and Training Boost with
longer timelines and proper implementation.
• Broaden the Future Made in Australia eligibility to support all sectors with the capacity to
contribute, either directly or indirectly, to net zero and economic resilience.
4. Strengthening industry–research collaboration
To bridge the gap between research and commercialisation, ACCI recommends increasing structured engagement between business and academia, particularly for SMEs. Intellectual property negotiations, capability constraints, and differing priorities remain barriers to effective collaboration.
• Simplify IP frameworks to reduce friction and promote shared value creation.
• Incentivise greater cooperation between SMEs and research institutes, including universities.
• Provide support for Cooperative Research Centres (CRCs) that facilitate long-term SME
participation in collaborative R&D.
• Invest in innovation hubs, including place-based incubators and virtual collaboration models to
engage SMEs across regions and industries.
• Refocus the Industry Growth Program to support a broader range of innovative projects and
business models.
5. Building a skilled R&D workforce for the future
The current higher education system and industry could work more effectively together to develop a pipeline of industry-ready R&D professionals. ACCI proposes reforming research training and embedding commercial relevance in tertiary education pathways to better prepare graduates for applied research roles.
• Develop co-designed curricula with industry input and embed commercial R&D skills into higher
research training and relevant higher education programs.
• Leverage Regional University Study Hubs and invest in regional R&D ecosystems to support net
zero transition and retain local talent.
• Support the development of training via webinars and targeted outreach to help SMEs navigate
R&D opportunities, access collaboration pathways, and understand commercialisation potential.

2 ACCI Submission: Strategic Examination of Research and Development
Recommendations
1. Design and implement a national strategy for R&D.
2. Establish a clear national objective for R&D with cross-sector alignment, and send consistent policy signals to
demonstrate to businesses that R&D is a national priority.
3. Support building the physical and human infrastructure necessary to support R&D.
4. Re-align R&D definitions to reflect the reality of businesses’ innovation processes.
5. Consult with large, small and medium companies to better understand their R&D processes and investigate what
the economic conditions they would like to see to encourage R&D investment.
6. Conduct an internal evaluation of successful Australian start-ups that have grown into prominent domestic or
global companies to assess the role of government support in their development and identify missed opportunities.
7. Revise the R&DTI turnover threshold to better reflect current economic conditions, simplifying administrative
processes to reduce compliance burdens, and exploring mechanisms to provide more immediate financial support.
8. Lower the corporate tax rate to incentivise greater risk-tolerant private sector investment into R&D.
9. Modernise the tax system to create a simpler, more competitive tax environment that encourages businesses to
reinvest earnings.
10. Expand the existing Patent Box regime to include patents across all sectors—particularly manufacturing and ICT—
where significant opportunities for commercialisation are emerging.
11. Make the Instant Asset Write-off permanent and $50,000 to give SMEs confidence in their ability to participate in
R&D.
12. Explore the feasibility of implementing income contingent loans as a funding mechanism for R&D activities.
13. Reinstate the Small Business Technology Investment Boost, and Small Business Skills and Training Boost.
14. Broaden Future Made in Australia’s scope to fund experimental development in non-priority manufacturing sectors.
15. Simplify and standardise IP frameworks to help reduce friction, build trust, and unlock more industry-research
partnerships.
16. Incentivise greater cooperation between SMEs and research institutes, including universities.
17. Play a facilitative role in the establishment and support of Cooperative Research Centres to create structured
opportunities for SMEs to engage with universities, research institutions and larger businesses.
18. Invest in innovation hubs as incubator programs to work with state governments and local councils so SMEs have
access to collaborations, novel academic knowledge and market knowledge and experience.
19. Incentivise higher education and industry to collaborate on curriculum development that will better equip the R&D
workforce, with particular emphasis on the regional workforce.
20. Leverage the Regional Study Hubs to facilitate collaboration between universities, research institutes and
businesses.
21. Facilitate business peaks and industry associations to develop training for SMEs to gain information about R&D
opportunities for their companies and gain market knowledge.

3 ACCI Submission: Strategic Examination of Research and Development
Introduction
The Australian Chamber of Commerce and Industry (ACCI) welcomes the opportunity to provide comments on the Department of Industry, Science and Resources (DISR)’s first discussion paper (the discussion paper) for the Strategic Examination of Research and Development (the SERD). Research and development (R&D) is a fundamental driver of economic growth, productivity, and competitiveness.
It enables the creation of new industries, the transformation of existing sectors, and the development of solutions to national challenges—from energy transition to health, defence and advanced manufacturing.
An effective R&D system accelerates innovation, attracts investment, and builds the foundations for long- term prosperity. This is of critical importance to the business sector in Australia, and indeed, to all
Australians.
ACCI is Australia’s largest and most representative business network. Our members are state and territory chambers of commerce, national industry associations and a council of business leaders from individual enterprises. Together, we represent Australian businesses of all shapes and sizes, across all sectors of the economy, and from every corner of our country.
While we represent businesses of all sizes, the breadth of our membership means we are the pre-eminent peak body representing small businesses in Australia. Within our membership of more than 70 national industry associations, many have members who are small business owners across a vast array of sectors, including builders, mechanics, plumbers, electricians, pharmacists, restaurants, retailers, accommodation providers, vets, convenience store owners, dentists and travel agents, to name but a few.
ACCI and our members are committed to a more productive and innovative economy. Australia’s future prosperity will depend on our ability to lift productivity, develop sovereign capabilities, and create new value through commercialised knowledge and technology. Yet the current R&D system is not fit for purpose in an economy where 97 per cent of businesses have fewer than 20 employees.
Small and medium-sized enterprises could be more willing and capable contributors to Australia’s research and innovation effort — but they are operating within R&D policy settings designed around large institutions, major firms, and traditional academic models of knowledge creation. R&D programs that are overly complex, poorly communicated or inaccessible to businesses—particularly smaller businesses— risk leaving vast economic potential untapped.

4 ACCI Submission: Strategic Examination of Research and Development
Research and development as a national priority
The Australian Government must send a R&D as a top opportunity for growth clear, consistent signal that research and 73.6% of Queensland businesses rank development is a national priority, innovation and business-led R&D as the top supported by a long-term, bipartisan opportunity for growth.
commitment. This means identifying and implementing a transparent and systematic Business Chamber Queensland
2025 Federal Election Survey process that incorporates expert input, industry perspectives and rigorous prioritisation. Establishing and sustaining national priorities could create certainty for investors, sharpen the focus of public and private R&D efforts, and encourage alignment across funding bodies, universities and industry—although we caution against limiting R&D to specific sectors or types of organisation. A credible national R&D agenda—well-articulated and consistently reinforced—that is then captured in a
National R&D Strategy would galvanise business ambition, drive commercialisation, and position
Australia to meet emerging global and domestic challenges.

Embedding R&D as a national priority through policy stability
A stable, long-term and bi-partisan national focus on R&D is needed to cultivate an integrated, sustainable, dynamic and impactful R&D system.
Businesses require a clear national objective and consistent policy signals to justify their investment into
R&D and help them rationalise the many inherent risks. These risks include: innovation risks (adaptation, intellectual property rights); market-related risks (commercial viability, competition risk, regulatory risks), financial risks (cost overruns, budget constraints), organisational barriers (skilled workforce and equipment, collaboration) and external factors (political instability, economic downturns) 1. In addition, businesses are vulnerable to bearing the fixed costs of being the initial inventor. After a breakthrough in
R&D, competitors in the same industry can quickly imitate the innovation—sometimes developing more commercially viable products—leaving the original innovator unable to fully capture the returns on their investment. This risk of imitation lowers the expected returns for companies investing in similar R&D, potentially discouraging future innovation 2.
To galvanise industry to take these risks and invest in Australia’s future through R&D, the government needs to maintain a policy environment stable enough for businesses to observe and measure the tangible economic outcomes of R&D investment.
This is particularly important for small and medium-sized enterprises (SMEs), which often lack the surplus capital, in-house expertise, or established research networks needed to mitigate R&D-related risks. A supportive and consistent policy framework would give SMEs the time and confidence to build collaborative partnerships, develop workforce capability, and scale their R&D efforts. Without such certainty, many promising ideas never translate into commercial or national benefit.

1 Coras, Eliza Laura, and Adrian Dumitru Tantau. 2013. “A Risk Mitigation Model in SME's Open Innovation Projects.”
Management & Marketing 8 (2): 303.
2 Kevin A. Bryan and Heidi L. Williams, "Innovation: Market Failures and Public Policies," in Handbook of Industrial

Organization, vol. 5, no. 1 (Amsterdam: Elsevier, 2021), 281–388.

5 ACCI Submission: Strategic Examination of Research and Development
Strengthening R&D foundations: Infrastructure, workforce, and business engagement
Strengthening Australia’s R&D foundations requires a dual focus on building the physical and human infrastructure necessary to support R&D, as well as creating the right incentives to encourage business participation.
Investment in cutting-edge research infrastructure and the development of a skilled, research-capable workforce are essential to ensuring that Australia remains competitive in a rapidly evolving global economy. Australia punches above its weight in research—contributing major innovations like WLAN technology for Wi-Fi 3, pioneering solar cell designs that have helped reduce the cost of solar energy. 4, and developing Cochlear implants, a revolutionary medical device that restores hearing to people who are profoundly deaf or severely hard of hearing 5. These examples highlight the importance of continued investment in basic research—even when outcomes are uncertain—because it expands the global knowledge base and may lead to breakthroughs in the future. Encouraging a less risk-averse approach to research and innovation would strengthen Australia’s R&D ecosystem and deliver long-term economic and societal benefits.
To tie it together, more of this world-class R&D must be translated into commercial products. Therefore, more targeted and accessible incentives are needed to drive greater private sector engagement in R&D, particularly among small and medium-sized enterprises. By aligning infrastructure, workforce development, and business incentives, Australia can create a more cohesive and resilient innovation ecosystem capable of delivering long-term economic and societal benefits.
However, the existing industrial relations environment in Australia creates disincentives for growth. When a small business grows beyond 14 employees, it is deemed to have a large enough operational footprint to be able to deal with the same compliance requirements as a large business with a substantial HR and legal team. Most notably, it is no longer classified as a small business under the Fair Work Act, meaning employees become eligible to lodge unfair dismissal claims after six months of service rather than 12, and the business can no longer rely on the simplified Small Business Fair Dismissal Code. It also becomes liable to pay redundancy entitlements under the National Employment Standards, and may be subject to more detailed consultation obligations under certain modern awards or enterprise agreements. Many small businesses choose to remain under that threshold for this reason, limiting their capacity for greater involvement with research and development.
Therefore, supporting small enterprises to scale into medium-sized businesses is essential in strengthening Australia’s R&D foundations. As firms grow, they gain the resources and capacity needed to invest in research activities, hire skilled staff, and engage more meaningfully with research institutions.
Medium-sized enterprises are more likely to formalise their R&D efforts, pursue innovation funding, and contribute to national innovation outcomes. Targeted support for this growth such as improved access to research infrastructure, skilled talent, and collaborative R&D networks can help unlock the untapped potential of smaller firms and foster stronger connections between industry and research. This not only broadens the base of R&D-active businesses but also enhances the resilience and dynamism of
Australia’s innovation ecosystem.

3 O'Sullivan, John. "How we made the wireless network." Nature Electronics, vol. 1, no. 2, 2018, pp. 75–77
4 Bagshaw, Eryk. “Can Australia Build a Solar Manufacturing Industry without China?” ABC News, April 24, 2024.
https://www.abc.net.au/news/science/2024-04-24/australia-need-chinas-help-for-solar-sunshot-manufacturing- plan/100954734.
5 Bondarew, Veronica, and Peter Seligman. The cochlear story. Csiro Publishing, 2012.

6 ACCI Submission: Strategic Examination of Research and Development
This submission
This submission does not respond to all questions outlined in the discussion paper but does address relevant issues from each section. It draws on direct feedback from ACCI members, including those with
SMEs as members, and outlines a set of practical reforms to build a more dynamic, inclusive and commercially relevant R&D system for Australia. We have divided our feedback into three parts:
1) What is Business R&D?
2) Incentives, funding and institutional reform
3) Capability, access and workforce

Recommendations for R&D in Australia
• Design and implement a national strategy for R&D.
• Establish a clear national objective for R&D with cross-sector alignment, and send consistent policy
signals to demonstrate to businesses that R&D is a national priority.
• Support building the physical and human infrastructure necessary to support R&D.

7 ACCI Submission: Strategic Examination of Research and Development
Part 1: What is Business R&D?
Aligning R&D definitions with real-world business practice
ACCI advocates for a more accurate and flexible definition of R&D—one that reflects how businesses innovate and generate value. Current policy frameworks tend to treat research and development as a single, linear process—progressing neatly from basic research, to applied research, to experimental development. In reality, research and development are distinct activities that often occur independently or in parallel, rather than sequentially. Importantly, innovation is not simply an end point of this process.
It is a core part of the R&D cycle—where businesses apply knowledge to create or improve products, services, or processes. As the Discussion Paper notes, research increases the stock of knowledge, and development applies this knowledge—but innovation is what brings it to life in the market.
In practice, this relationship is iterative. Businesses may innovate first—by redesigning a service or adopting a new technology—which then leads to further research or development to refine or scale the solution. This feedback loop is not well captured in current definitions, which risks overlooking how value is created across the economy.

Making Australia’s R&D definition work for Australian businesses
Australia’s R&D system must evolve to align with the way businesses actually innovate. As discussed above, the current framework—anchored in a linear definition of R&D that separates basic research, applied research, and experimental development—fails to capture the iterative and dynamic processes through which businesses generate new knowledge. This disconnect is a major barrier to industry engagement and investment, particularly among small and medium-sized enterprises.
Consequently, many businesses do not think of themselves as undertaking R&D, because it isn’t what they set out to do—it’s a by-product of other innovative activity. They therefore do not take advantage of government incentives that could help them to broaden the scale and scope of their activities, increasing their productivity and potentially giving them a new revenue stream, should they choose to commercialise their discoveries.
Business ventures that appear to be innovation or product development at first glance have the potential to generate novel knowledge with broader applications. Recognising this complexity would ensure more businesses and research efforts are eligible for support under government R&D policies and incentives.
It would also help build a more accurate picture of national innovation capability and better align Australia’s
R&D system with how knowledge is created and applied in the modern economy. These breakthroughs should qualify as R&D, particularly when they lead to experimental development or reapplication in different contexts.
The government should modernise Australia’s R&D definitions to explicitly include commercially driven innovation processes that lead to new knowledge and insight. This includes recognising innovation-led activities that spur subsequent research and experimental development, particularly in data-rich, software-intensive, and services-based sectors. Activities such as those described above, where innovation precedes and feeds back into systematic research—particularly when they are undertaken by small or medium-sized businesses—must be treated as legitimate R&D and made eligible for public incentives.

8 ACCI Submission: Strategic Examination of Research and Development
Case Study: Buy Now Pay Later Industry – Afterpay

An example of industry-led innovation with broader applications is the rise of Buy Now Pay Later (BNPL), which
has reshaped consumer credit by offering short-term, interest-free financing through personalised, user-focused
credit assessment. The introduction of this payment method has led to productivity gains by reducing reliance
on traditional resources like laybys, inventory storage, and labour (such as manpower, storage, and time). As a
result, businesses can achieve higher output—selling more goods and services—while consumers are
empowered to purchase what they need when they need it, thus boosting their consumption capacity.

Afterpay not only created a new market category but also became the largest acquisition in the Australian Stock
Exchange’s history in 2021, demonstrating the commercial potential of innovation in financial services. However,
Afterpay’s origin story reflects the challenges and opportunities faced by early-stage startups navigating
Australia’s innovation ecosystem. At the time, there was limited awareness and understanding of available
government programs to support software R&D. As a startup, Afterpay’s rapid growth did not necessarily align
with the time-intensive nature of R&D applications, the lack of clarity around eligibility for software-related
incentives and unpredictability of future growth expectations. Put simply, the scale and way in which many
startups grow can make even small hurdles in navigating Australia’s R&D incentive systems a significant
impediment.

Although direct Government incentives were not as relevant for Afterpay, the Australia’s Government’s approach
to regulation of Buy Now Pay Later products was critical to its local success. The Government’s incremental and
collaborative approach to regulation, and willingness to accommodate and consider new models, established a
comparably stable policy environment. This enabled the kind of steady growth and investor confidence that is
necessary for startups to succeed. This highlights the value of regulatory certainty for innovative industries, while
also underscoring the need to improve early-stage support so more startups have the opportunity to succeed.

Afterypay’s business model shows that innovation in re-thinking consumer credit does lead to increase
competition in the wider industry spurring industry-wide R&D investment. Today, as an established player in the
global financial market, Afterpay continues to innovate—but like many organisations, the delineation between
product development and R&D is not always clear.

Find more about how Afterpay collaborates with businesses of all sizes as well as higher education and research
institutions later in our submission here.

Broadening the definition of R&D to reflect real-world business practice is critical to unlocking greater participation, especially among SMEs whose innovation processes are iterative, commercially driven, and often unrecognised under current policy settings. By acknowledging that research and innovation are not always linear—and that valuable knowledge creation can stem from applied practice as much as from formal inquiry—the government can better support the diversity of pathways through which
Australian businesses contribute to national innovation. A modernised, inclusive definition would not only expand access to incentives but also ensure Australia’s R&D policy framework keeps pace with the realities of a dynamic, services-led economy.

9 ACCI Submission: Strategic Examination of Research and Development
Recommendations for better defining business R&D
• Re-align R&D definitions to reflect the reality of businesses’ innovation processes.
• Consult with large, small and medium companies to better understand their R&D processes and
investigate what the economic conditions they would like to see to encourage R&D investment
• Conduct an internal evaluation of successful Australian start-ups that have grown into prominent
domestic or global companies, to assess the role of government support in their development. The
evaluation should assess: Whether these start-ups received government funding or support during
their early stages and the underlying reasons why some successful ventures may have opted not to
access available government programs or why they were ineligible to do so.

10 ACCI Submission: Strategic Examination of Research and Development
Part 2: Incentives, funding and institutional reform
What are the most effective business incentives?
According to international literature, the most effective incentives for business R&D are tax credits and subsidies 6, as R&D is perceived as a public good that the market tends to underprovide without government support 7. Tax incentives not only stimulate R&D investment but also drive broader innovation outcomes by encouraging businesses to take on higher-risk, longer-term research projects.
Tax incentives should be:
1. Refundable
2. Smoothly phased-out
3. Supported with grants and/or loans, and
4. Properly implemented via support from government policies 8.
Effective R&D incentives would be targeted towards projects with positive social spillovers11. This means prioritising research that generates benefits beyond the firm itself, such as improving public health, advancing environmental sustainability, or strengthening national capability. These are areas where the social return outweighs the private return, making a strong case for public investment.
However, tax incentives alone are insufficient as a form of government support for SMEs, due to the structural characteristics of these firms. Many SMEs lack sufficient taxable income to fully benefit from standard tax credits and often face internal financing constraints, limiting their capacity to invest in R&D.
As a result, forms of support that are more sensitive to the realities of cashflow—such as refundable tax credits, cash refunds, and direct grants—are also necessary, particularly for early-stage or loss-making firms11.
Another approach to targeted interventions would be to use financial instruments such as public loans, guarantees or public venture capital6— for example, low-interest loans from government agencies to help businesses that may not qualify for bank financing; loan guarantees where the government promises to repay part (or all) of a loan if the business cannot, making banks more willing to support riskier R&D ventures; and public venture capital, where the government invests directly in early-stage or growing businesses in exchange for a share in the company. These tools can help alleviate financial constraints by reducing information asymmetries between stakeholders and R&D ventures, making it easier for innovative firms to access funding. In addition, SMEs require improved access to critical inputs—such as skilled labour and knowledge transfer programs—which complement investment incentives and support the adoption of new technologies6.
An important consideration in the literature is that targeted industrial policies should avoid favouring specific technologies over others. Instead, policies should take a broad, system-wide view of the entire industrial ecosystem. Economic theory supports public investment tools such as tax incentives, grants, and subsidies—especially when those investments generate wider benefits, or 'spillover effects', that

6 Chiara Criscuolo, Nicolas Gonne, Kohei Kitazawa, and Guy Lalanne, Are Industrial Policy Instruments Effective?, OECD
Science, Technology and Industry Policy Papers (2022).
7 Bronwyn Hall and John Van Reenen, "How Effective Are Fiscal Incentives for R&D? A Review of the Evidence," Research

Policy 29, no. 4–5 (2000): 449–469.
8 Silvia Appelt, Matej Bajgar, Chiara Criscuolo, and Fernando Galindo-Rueda, R&D Tax Incentives: Evidence on Design,

Incidence and Impacts (2016).

11 ACCI Submission: Strategic Examination of Research and Development
extend beyond the firm undertaking the activity (for more on this idea, see our case study on manufacturing in the caravan sector on p. 19).

Case Study: Paintback—Aligning Funding Opportunities with Practical Research Needs

Paintback is a small, industry-led, not-for-profit organisation that collects and safely disposes of unwanted paint
and packaging across Australia. Its model is designed to invest in research that finds innovative ways to
repurpose waste paint into valuable new products. It has collected and treated over 60 million kilograms of
unwanted paint and packaging since 2016, with more than 165 drop-off locations nationwide, and continues to
invest in R&D to achieve full diversion from landfill and advance circular recovery solutions.

However, their experience with government R&D funding highlights a broader misalignment between business
needs and how grant programs are designed and assessed. As a non-profit focused on commercialising circular
solutions for paint waste, Paintback actively seeks applied research funding but has consistently faced significant
barriers.

At the federal level, the Recycling Modernisation Fund (RMF) 9 initially appeared to be a strong fit, with its
inclusion of both rigid and soft plastics. However, in practice, the assessment process was narrower than
expected, and Paintback found that technically sound proposals were overlooked in favour of projects with soft
plastics. Similarly, the Victorian Government’s Industry R&D Infrastructure Fund 10 was focused on advanced
manufacturing and technologies like 3D printing and quantum computing. Although Paintback’s work addresses
significant environmental challenges in a niche area of waste management and recycling, its practical, industry-
led approach did not align with the program’s priorities, and its application was ultimately unsuccessful.

Paintback was also initially enthusiastic about the Future Made in Australia (FMA) initiative, recognising a
potential opportunity to explore paint recycling within the scope of low-carbon liquid fuels, given paint’s
hydrocarbon base. However, the program’s narrow framing and niche eligibility criteria made it difficult for them
to even pose their research concept—ultimately deterring them from pursuing a grant application.

Paintback’s experience demonstrates how well-intentioned and nationally beneficial R&D programs can fall short
when they are not aligned with the practical realities of business—particularly for organisations focused on
commercially scalable and preventive innovations. More broadly, the case highlights the value of non-
discretionary grants with clear and objective criteria, which are more accessible to mission-driven organisations,
compared to discretionary programs that often prioritise optics, policy announcements, or headline job creation.

To read more on Paintback’s experience collaborating with higher education press here.

Aligning existing government initiatives with business needs
As outlined in the discussion paper, Australia is lagging behind in gross expenditure on R&D, investing just 1.66% of GDP compared to the OECD average of 2.73%. Australia's low level of investment in R&D

9 Department of Climate Change, Energy, the Environment and Water, “Recycling Modernisation Fund,” Australian

Government, accessed April 15, 2025, https://www.dcceew.gov.au/environment/protection/waste/how-we-manage- waste/recycling-modernisation-fund.
10 Business Victoria, “Industry R&D Infrastructure Fund: FAQs,” Victorian Government, accessed April 15, 2025, https://business.vic.gov.au/grants-and-programs/industry-r-d-infrastructure-fund/faqs.

12 ACCI Submission: Strategic Examination of Research and Development
can be linked to the low rates of business investment more broadly. The tax and regulatory regime weigh heavily on business investment. Major, comprehensive reforms are needed to modernise the tax system and reduce the regulatory burden on business to stimulate greater investment by business. This can then flow through to investment in R&D. Further, incentives and funding mechanisms for R&D need to be better aligned to businesses' needs, with a genuine commitment to encouraging businesses to invest in
Australia's innovation ecosystem. Therefore, the government must realign its incentives and funding mechanisms with business needs—demonstrating a genuine commitment to R&D and encouraging industries to reinvest in Australia’s innovation ecosystem.
In the following paragraphs, we outline a
THE R&D TAX INCENTIVE—ACCORDING TO series of broader initiatives the government currently has in place or has THE BUDGET introduced in the past and then removed. The R&D Tax Incentive program is gearing up for a surge
It is recommended that these initiatives of $55.8 million in 2025–26, only to retract by $640.6 be adapted to make them more fit-for- million over the following five years as claim volumes fall purpose in encouraging business short of expectations. Across Agriculture, fisheries and investment in R&D. forestry, the Commonwealth continues its push for
innovation by matching eligible R&D expenditures, yet
Redesign the R&D Tax Incentive the long-term financial impact remains tied to the with SMEs in mind fluctuating Gross Value of Production (GVP) cap.
Meanwhile, general research spending oscillates
The Research and Development Tax between $3,947 million and $4,775 million, underscoring
Incentive (R&DTI) is Australia's primary the country's shifting priorities. In mining, manufacturing, policy tool designed to encourage and construction, R&D tax incentives are on track for business investment in innovation. While steady growth through 2028–29, fueled by rising claims.
it offers significant benefits, its current Even in international agriculture R&D, Australia maintains structure presents challenges for small a stable presence with funding ranging between $129 and medium-sized enterprises (SMEs), million and $135 million. The numbers tell a story of particularly those that are loss-making or adaptability, ambition, and a future shaped by calculated have constrained cash flow. investment in innovation.

Cash flow constraints
A critical issue is the timing of the incentive's benefits. SMEs often face cash flow limitations, and the retrospective nature of the R&DTI means that firms must incur R&D expenses upfront and await reimbursement through tax offsets. This delay can be particularly burdensome for early-stage companies that lack the financial reserves to sustain operations during the waiting period. Quarterly instalments based on forecast R&D spend would assist SMEs to manage cashflow more effectively.
Turnover threshold challenges
The R&DTI distinguishes SMEs from larger companies using a $20 million annual turnover threshold to determine eligibility for certain benefits. This static threshold, unchanged since 2011, creates a "rebate cliff" where a company just below the $20 million turnover mark receives more than double the benefit compared to a company that slightly exceeds it. Such a structure can discourage growth, as SMEs may be hesitant to expand beyond the threshold due to the significant reduction in R&DTI benefits.
Administrative Complexity
Navigating the R&DTI's requirements can be complex and resource-intensive. SMEs, which may lack dedicated compliance teams, often find it challenging to meet the detailed documentation and eligibility

13 ACCI Submission: Strategic Examination of Research and Development
criteria, while the online calculator of eligibility is too complex to offer practical value to most users. The risk of non-compliance or misunderstanding the requirements can deter some businesses from fully engaging with the program, thereby limiting its effectiveness in promoting widespread innovation.
To enhance the R&DTI's effectiveness for SMEs, considerations could include revising the turnover threshold to better reflect current economic conditions, simplifying administrative processes to reduce compliance burdens, and exploring mechanisms to provide more immediate financial support. Addressing these areas could make the R&DTI more responsive to the needs of SMEs and bolster Australia's overall innovation landscape.

Lower the corporate tax rate
Currently, Australia’s corporate tax rate sits at 30%, and has not changed since 2001-2002 11. A lower corporate tax rate would incentivise greater private sector investment, particularly in long-term, high-risk areas such as R&D and technology development. For many businesses, high tax obligations constrain their ability to scale, export, or commercialise R&D outputs. Given that research can fail, yield no commercially viable outcomes, or face barriers to market adoption, businesses are often reluctant to invest in R&D without a clear path to commercial success. A more competitive tax environment would offer the financial flexibility needed to pursue innovation with greater confidence, while helping businesses remain competitive in their industries.
Comprehensive tax reforms, including lowering the corporate tax rate, are needed to create a simpler, more competitive tax environment that encourages businesses to reinvest earnings and pursue long-term value creation. In addition, better aligning Australia with international tax norms would help to attract greater foreign investment and enhance productivity across the economy.

Case study from Germany: the impact of tax reform and revoking dividend imputation on Gross
Expenditure on R&D (GERD)

Germany undertook comprehensive tax reform in 2000 to simplify the corporate tax system and improve
international competitiveness, moving to a classical tax system where corporate profits and dividends are taxed
separately, aligning more closely with global investment practices and making Germany a more attractive
destination for foreign capital.

Since 2000, Germany’s GERD has increased from 2.4% to 2.73%. This growth can be attributed to structural
tax reform:
• Expansion in key industries such as automotive and sustainable technologies,
• Consistent government investment in innovation and public–private research partnerships, and
• An effective R&D tax incentive via the Growth Opportunities Act introduced in 2020:
o Provides subsidies of up to 25% of eligible R&D expenditures, with a maximum allowance of
one million Euros
o Is available to large, small and medium-sized businesses, established companies, start-ups
and even self-employed individuals
o Covers costs associated with both individual and cooperative R&D research projects
o Includes funding for basic research, industrial research, and experimental development
o Places no restrictions on the industry, location or subject matter of the research

11Australian Taxation Office. "Company Tax Rates." Last modified March 21, 2024. https://www.ato.gov.au/tax-rates-and- codes/company-tax-rates.

14 ACCI Submission: Strategic Examination of Research and Development
o Allows funding regardless of whether the R&D project has not yet commenced, is ongoing, or
has already been completed.
o Recognises contract research—that is, research commissioned through external contractors
or service providers—as eligible for funding under the research allowance.

Patent Box
Australia's Patent Box regime is a tax incentive designed to encourage companies to conduct research and development (R&D) and commercialise innovations within the country. Introduced in the 2021–22
Federal Budget, the scheme offers a reduced corporate tax rate on profits derived from eligible patents.
The patent box is a positive step toward improving the international competitiveness of Australian innovation. However, its scope remains too narrow. It should be expanded to include patents across all sectors—particularly manufacturing and ICT—where significant opportunities for commercialisation are emerging.

Make the Instant Asset Write-Off permanent
The Instant Asset Write-Off (IAW) is due to expire on 1 July 2025 12. However, the government announced that they will extend the $20,000 Instant Asset Write Off for an additional 12 months if re-elected. While this is better than letting it revert to the $1000 threshold next July, consideration should also be given to raising the value of eligible depreciable assets to $50,000 and increasing the threshold for eligible businesses to an aggregated turnover of $50 million. This would have greater impact, as it would enable business to invest in more substantial assets as well as enabling more businesses to invest.
At the current threshold of $20,000, the scope of eligible assets under the IAW is severely constrained.
This amount is insufficient to cover the purchase of even moderately sophisticated R&D equipment, such as a quality 3D printer or essential laboratory instruments. Consequently, it limits access to transformative technologies that could significantly enhance research and innovation capacity. Raising the threshold to
$50,000 would greatly expand the range of eligible equipment, allowing for the acquisition of more advanced and impactful technology. This includes capital-intensive assets like a Nuclear Magnetic
Resonance (NMR) spectrometer—vital across disciplines such as chemistry, biology, medicine, materials science, and food science—or a Computer Numerical Control (CNC) machine, crucial for precision engineering and prototyping. Increasing the cap would align the policy more closely with the real costs of contemporary innovation infrastructure. A higher write-off amount would support more and a wider range of investments, thereby making a greater contribution to economic activity and productivity growth.
Further, these changes could be complemented by making the IAW available for the first $50,000 of an eligible depreciable asset of any value, with the remainder of the asset value depreciated over subsequent years of its operational life according to normal depreciation schedules 13. This would encourage small to medium enterprises (SMEs) to make more substantial investments and make a greater contribution to productivity and economic growth.

12Australian Taxation Office. (n.d.). Instant asset write-off. https://www.ato.gov.au/businesses-and-organisations/income- deductions-and-concessions/depreciation-and-capital-expenses-and-allowances/simpler-depreciation-for-small- business/instant-asset-write-off
13

15 ACCI Submission: Strategic Examination of Research and Development
There is also a good case to provide support for businesses of all sizes to make larger-scale investments in high-technology machinery and equipment. Larger-scale investments require substantial upfront capital that may require several years to realise a return. Offering an investment allowance of 20 per cent of the value of depreciable assets over $100,000 will help businesses justify the initial upfront cost of capital.
This support would help de-risk the initial outlay and accelerate decision-making on high-impact assets.
An additional tax allowance for larger-scale, longer-term investments would give businesses greater confidence to commit to transformative R&D investments that drive greater productivity gains, innovation, and global competitiveness.

Introduce income contingent loans for R&D
The Federal Government currently supports an income contingent loan scheme in the higher education sector (HECS-HELP). This loan program allows eligible students to defer the cost of their university tuition.
Instead of paying fees upfront, students repay the loan through the tax system once their income exceeds a set threshold. The loan is indexed annually to reflect inflation but does not accrue interest.
R&D, like higher education, is a public good, while also having potential benefits for the individual (or business) making the investment. Implementing income contingent loans for R&D activities could support and stimulate innovation in parallel with the lower corporate tax rate and permanent IAW.
As traditional funding mechanisms often favour companies with extensive resources, income contingent loans for businesses could allow smaller firms to access necessary funds.
Furthermore, income contingent loans could also reduce risk for local businesses through the flexible repayment structure, which is tied to the successful outcomes of the R&D activities. This flexibility could encourage more SMEs to consider investing in R&D.

Reintroduce the Small Business Technology Investment Boost (SBTIB) and the Skills and
Training Boost (STB)
Previous government funding schemes, such as the Small Business Technology Investment Boost
(SBTIB) and Skills Training Boost (STB) programs, have failed to achieve their goals effectively.
The Small Business Technology Investment Boost (SBTIB) was designed to support small businesses with an aggregated annual turnover of less than $50 million by allowing an additional 20% tax deduction for eligible digital operations and investments in depreciating assets 14. The boost applied to business expenses and depreciating assets, capped at $100,000 of expenditure per income year, enabling a maximum bonus deduction of $20,000.
Similarly, the Skills and Training Boost (STB) provided small businesses with the same turnover threshold access to an additional 20% tax deduction for external training courses delivered by registered training providers 15. This measure aimed to upskill employees and help small businesses keep pace with changing workforce demands.

14 Australian Taxation Office. (n.d.). Small business technology investment boost. https://www.ato.gov.au/businesses-and- organisations/income-deductions-and-concessions/income-and-deductions-for-business/deductions/small-business- technology-investment-boost
15 Australian Taxation Office. (n.d.). Small business skills and training boost. https://www.ato.gov.au/businesses-and- organisations/income-deductions-and-concessions/income-and-deductions-for-business/deductions/small-business-skills- and-training-boost

16 ACCI Submission: Strategic Examination of Research and Development
Both programs had the potential to address critical digital capability gaps and equip the workforce with the skills required to remain relevant in the face of accelerating AI adoption across the small business sector. Current data shows that approximately one in five small businesses in Australia lacks the skills and expertise needed to capitalise on or repurpose recent R&D developments, highlighting the importance of targeted support in this space. Programs like the SBTIB and STB could have created an equitable digital transformation and unlocked productivity gains across the small business sector.
However, the SBTIB and SBT programs failed to deliver the intended benefits. The SBTIB, announced in the October 2022 Budget, was effectively defunct before it began—the legislation to activate the program was not passed before its scheduled closure date. The Skills and Training Boost fared only marginally better, with a limited implementation period of just nine months. These compressed timelines rendered the programs largely inaccessible for many small businesses, which require longer lead times to plan investments and training. As a result, many of the business community were unable to access the benefits of these programs and felt that the government was not adequately addressing the digitalisation gap in
Australia, which disproportionately affects small businesses. Without targeted government intervention, this digital divide risks deepening innovation capability gaps and the underutilisation of recent R&D outcomes, stalling entrepreneurial growth, and leaving many small firms behind in an increasingly tech- driven marketplace.
The following case study highlights the missed opportunity for the proliferation of R&D developed by a small business owner due to the failure of the SBTIB and SBT scheme show and the implications this had had on SMEs attitude toward R&D investment. If the government wants to support R&D through digital adoption and skills development among small enterprises, it must reintroduce both initiatives with longer- term certainty and consider making them permanent.

Case study: How the Small Business Technology Investment Boost (SBTIB) program could have helped
small business R&D

A recent example from the accounting sector highlights how a sole practitioner successfully built an AI tool to
automate tax compliance processes, drastically reducing the need for manual input. The tool could potentially
transform accounting practices by drastically reducing the need for manual labour in handling routine processes,
requiring only minimal human oversight to verify AI-generated results. Despite its significant productivity and
economic potential, the accounting firm chose not to publish or commercialise their findings. The innovation was
achieved without any government support or incentive, and the firm expressed frustration at the perceived
irrelevance of the Small Business Technology Investment Boost (SBTIB), arguing that the program failed to
support grassroots, real-world innovation by small businesses like theirs.

With support from government initiatives like the SBTIB, firms are more likely to commercialise R&D innovations
like this, which could contribute to productivity lifts for whole industries.

17 ACCI Submission: Strategic Examination of Research and Development
Expand eligibility for the Future Made in Australia Innovation Fund
‘A Future Made in Australia’ (FMA) was a strategy announced by the Federal Government in April 2024 with the goals to maximise opportunities as Australia moves towards net zero and to secure Australia’s place in a changing global environment 16.
FMA potential projects are evaluated under the National Interest Framework (NIF) which consists of the net zero transformation stream and the economic resilience and security stream. As part of the provision of FMA support, the community benefit principles are embedded into the design of the project.
The FMA Innovation Fund is administered by the Australian Renewable Energy Agency (ARENA) which provides up to $1.5 billion in grant funding to support pre-commercial innovation, demonstration and deployment of renewable energy and low emission technologies, to support Australia’s transition to a net zero economy 17. The grant’s funding is split across three priority areas:
• $750 million to Green Metals including iron, steel, alumina and aluminium.
• $500 million to Clean Energy Technology Manufacturing to enable development of technologies
seeking to alleviate critical supply chain challenges facing the clean energy transition.
• $250 million to Low Carbon Liquid Fuels (LCLF) including sustainable aviation fuels and
renewable diesel.
This has implications for business R&D, as the FMA can be used to fund experimental development that draws on knowledge gained from research and practical experience—generating new knowledge with the aim of producing new products or processes or improving existing ones.
However, the FMA’s evaluation process through the National Interest Framework (NIF) excludes non- priority manufacturing sectors, despite their potential contribution to Australia’s transition to net zero by
2050. By narrowing the field of eligible applicants, the FMA risks becoming a top-heavy initiative with limited accessibility, rather than a genuinely inclusive industrial strategy.
In addition, the FMA’s Community Benefit Principles (CBP) add an additional layer of red tape that companies must navigate to secure government approval. These requirements will likely increase the administrative burden, drive up project costs for taxpayers, and impose a compliance load that disproportionately affects small and medium-sized enterprises (SMEs). Many businesses—especially small businesses—lack the expertise, resources, or administrative capacity to meet the complex criteria— effectively excluding them from opportunities that could otherwise support their growth and contribute meaningfully to the broader economy.

Case Study: Caravan Manufacturing for a Future Made in Australia (FMA)

The caravanning and camping industry plays a vital role in regional economies and national tourism, generating
over 15 million trips and 60 million nights annually—more than any other form of accommodation in Australia—
with over 90% of these nights spent in regional areas 18. With annual visitor expenditure exceeding $10.7 billion,

16 Australian Government Treasury. (n.d.). A Future Made in Australia. https://treasury.gov.au/policy-topics/future-made- australia
18 Caravan Industry Association of Australia, “Caravan Park Regional Visitor Economies Policy Advocacy Stream,” accessed

April 9, 2025, https://www.caravanindustry.com.au/policy-and-advocacy/caravan-park-regional-visitor-economies-policy- advocacy-stream/.

18 ACCI Submission: Strategic Examination of Research and Development
much of it focused on regional communities, the sector supports a wide range of local businesses beyond the
immediate caravan industry18.

However, caravan manufacturing production methods still reflect outdated 1990s practices, limiting the industry’s
ability to compete in a rapidly modernising global market. As part of the industry’s attempts to work toward the
Net Zero by 2050 transition, industry leaders in caravanning have begun investing in R&D to create lightweight,
low-emission caravans using composite materials. These innovations have resulted in a 15–20% productivity
increase.

Caravanning is not considered one of the priority manufacturing sectors for the FMA, and therefore these
manufacturers are not eligible to apply for support for their innovations through the FMA Innovation Fund. This
is unfortunate, given that the innovations that have already been achieved in this area will contribute to the
transition to net zero, and are likely to have positive spillover effects for other industries.

For sectors like caravanning to meaningfully contribute to national goals, there must be a more inclusive and
strategic R&D funding process. This includes ensuring that pre-announced projects are subject to proper sector
assessments and align with areas where Australia can be internationally competitive—delivering not only
innovation but value for money.

Recommendations for incentives, funding and institutional reform
• Revise the R&DTI turnover threshold to better reflect current economic conditions, simplifying
administrative processes to reduce compliance burdens, and exploring mechanisms to provide more
immediate financial support.
• Lower the corporate tax rate to incentivise greater risk-tolerant private sector investment into R&D.
• Foster the commercialisation of R&D and innovation in Australia through continued support for, and a
broadening of, the patent box to all industry sectors.
• Modernise tax system to create a simpler, more competitive tax environment that encourages
businesses to reinvest earnings.
• Expand the existing Patent Box regime to include patents across all sectors—particularly manufacturing
and ICT—where significant opportunities for commercialisation are emerging.
• Make the Instant Asset Write-off permanent and $50,000 to give SMEs confidence in their ability to
participate in R&D.
• Explore the feasibility of implementing income contingent loans as a funding mechanism for R&D
activities.
• Reinstate the Small Business Technology Investment Boost (SBTIB), and Skills Training Boost (STB)
for a longer time.
• Broaden Future Made in Australia’s (FMA) scope to fund experimental development in non-priority
manufacturing sectors.

18Caravan Industry Association of Australia, “Caravan Park Regional Visitor Economies Policy Advocacy Stream,” accessed
April 9, 2025, https://www.caravanindustry.com.au/policy-and-advocacy/caravan-park-regional-visitor-economies-policy- advocacy-stream/.

19 ACCI Submission: Strategic Examination of Research and Development
Part 3: Capability, access and workforce
Building relationships between SMEs and research institutions
As small businesses constitute 97% of all businesses in Australia, more needs to be done to improve their capability and access to R&D if the nation is to fully realise its R&D potential19. Businesses in their formative years often innovate out of necessity—developing new products, processes, or business models to gain market entry and stand out from competitors. These early-stage innovations represent significant untapped potential. When informed and supported by the latest R&D discoveries, they can accelerate productivity gains, generate new knowledge, and create spillover benefits across industries.
With the right support structures, these innovations can be refined, scaled, and adapted for broader applications, contributing meaningfully to Australia’s long-term economic and technological competitiveness.
Case Study: Tyre Stewardship Australia (TSA): Driving Circular Innovation through Research
Partnerships

Tyre Stewardship Australia (TSA) is a national, industry funded, government accredited and ACCC authorised,
not-for-profit organisation that administers the voluntary Australian Tyre Product Stewardship.

Operating within a circular economy framework, TSA fosters research collaborations across academia, industry,
and government to convert used tyres into valuable products and their applications. Its strategic focus on market
development and open-access research makes it a model of SME-aligned sustainability leadership.

Research-industry collaboration is central to TSA’s approach to innovation. By partnering with research
institutions, it ensures that cutting-edge research is translated into practical applications, helping to build
technical capability, validate process and product performance and safety, and accelerate the commercialisation
and uptake of sustainable solutions.

Importantly, this open-access model fosters knowledge sharing to benefit both large and small players across
the supply chain.

Australia is home to brilliant inventors and innovative ideas, yet the journey from R&D to market can be
challenging without the right support. TSA has focused on fostering local manufacturing and has achieved
notable success in specific markets. However, many groundbreaking R&D efforts face significant barriers to
commercialisation, primarily due to globalisation and the difficulty of staying cost-competitive in an increasingly
interconnected world. With the right support and strategic focus, Australian innovation can thrive in global
markets, unlocking new opportunities for growth and sustainability.

Notable market development efforts include:

• Crumb rubber integration into road construction
• Rubber-based building products such as rubberised particleboard
• Validating technologies that can process Australia’s significant problem in managing the large ‘off-the-
road’ tyres generated by mining and agriculture.

19Alexandra Heath, “The Current Economic Environment and the Outlook for Small Business,” speech, Reserve Bank of
Australia, April 4, 2024, https://www.rba.gov.au/speeches/2024/sp-ag-2024-04-04.html

20 ACCI Submission: Strategic Examination of Research and Development
By actively supporting product innovation and testing, TSA reduces market entry barriers for emerging technologies and opens pathways for long-term commercial uptake.

TSA’s operations reflect a highly collaborative, inclusive model that is well-suited to small and medium-sized enterprises. With a lean organisational structure and a mission-focused approach, TSA enables SMEs to participate in R&D and product innovation without prohibitive overheads or administrative burdens. TSA also offers grants and often facilitates new partnerships between SME and research institutes through its funding model.

TSA exemplifies how a focused, data and research-led organisation can catalyse industry innovation through strategic research partnerships and targeted market development. Its accessible, SME-friendly model demonstrates the power of collaborative stewardship in delivering circular economy outcomes—converting a complex waste stream into a national resource and innovation opportunity.

Case Study: Paintback – Collaboration with universities

Paintback operates a national paint and packaging recovery scheme and invests in research to develop sustainable reuse solutions, positioning it at the intersection of industry-led waste management and circular innovation. Its experience illustrates the challenge of aligning the goals of research organisations with those of university researchers—its focus is on sustainable solutions for paint waste, and to achieve this, it has partnered with universities and Cooperative Research Centres (CRCs) to explore innovative uses for recovered materials.
These collaborations have advanced the research agenda and helped Paintback gain novel knowledge and insights.

Positively, Paintback has found that universities in Australia demonstrate strong capability in progressing towards circular production models, with many institutions housing dedicated circular economy units. The quality of researchers engaged has generally been high, and CRCs—such as the Smartcrete CRC—have provided valuable platforms for networking, collaboration, and shared learning across disciplines and sectors.

However, universities and industry often operate on different timelines and incentives. For researchers, success is frequently measured by academic outputs such as publications and citations, which contribute to career progression (e.g. a strong h-index). In contrast, Paintback’s focus is on the practical viability of commercialising research outcomes—developing solutions that can be scaled and implemented in the market.

Moving from research to implementation proved challenging within traditional collaboration models with university partners. Intellectual property negotiations were one of several factors that influenced this shift. The time-consuming nature of IP discussions, along with fixed project scopes and limited capacity to adjust timelines or budgets, made it difficult to initiate new research collaborations and increased the barriers to translating basic and applied research into commercial outcomes.

Following the conclusion of a multi-year university contract, Paintback assessed the pathway to commercialisation and determined that the next stage of development would be better supported through direct industry partnerships. This decision reflected a need for greater flexibility, faster project execution, and more commercially aligned objectives.

Paintback’s case highlights the importance of designing collaboration models that recognise and reconcile differing institutional priorities. Streamlined IP frameworks, more flexible contracts, and shared expectations around commercialisation can help unlock the full potential of industry-research partnerships.

21 ACCI Submission: Strategic Examination of Research and Development
Intellectual property rights: a challenge of priorities
A key barrier to effective collaboration between industry and research institutions is the misalignment of priorities. While businesses often seek immediate, commercially viable solutions, universities are more likely to be focused on long-term research outcomes and academic publications. This disconnect can hinder the development of productive partnerships. Additionally, complex and time-consuming negotiations over Intellectual Property (IP) rights frequently delay projects and, in some cases, result in the abandonment of otherwise promising collaborations. Simplifying and standardising IP frameworks could help reduce friction, build trust, and unlock more industry-research partnerships. Incentivising industry to work with universities will continue to help facilitate these relationships that are not always a natural fit.

Cooperative Research Centres: a potential solution
Unlike large corporations, SMEs often lack the internal capacity to dedicate staff exclusively to R&D, and they typically do not have the time or infrastructure to monitor emerging innovations or regulatory changes.
Building R&D capability within the SME sector, therefore, requires targeted support in workforce development, systems transformation, and long-term collaboration with the higher education sector. To support this, ACCI recommends that the government prioritise the establishment and ongoing support of
CRCs and similar collaborative R&D hubs. These centres would offer structured opportunities for SMEs to engage with universities, research institutions, and larger businesses—facilitating knowledge exchange, access to emerging technologies, and the development of commercially relevant innovations.
By pooling resources and expertise, such partnerships can help overcome the resourcing constraints that
SMEs inherently face.
CRCs should also evolve to support remote and virtual collaboration, enabling SMEs to engage with participating institutions regardless of geographic location. This would expand access to R&D opportunities, foster greater inclusion across sectors and regions, and diversify the types of research being conducted—ultimately driving more dynamic and sustainable innovation ecosystems.
While CRCs hold strong potential, their effectiveness depends on genuine co-design with the private sector. Without this, they risk becoming just another science funding bucket lacking commercial focus.
For CRCs to succeed, they must offer clear market incentives and be anchored in industry demand and real-world application.

Case Study: The Parkville Precinct and the Waite Campus – R&D Hubs in Melbourne and Adelaide, a
solution for increased industry and higher education collaboration

The Parkville Precinct in Melbourne and the Waite Campus in Adelaide are two of Australia’s leading research
and development hubs. They offer strong blueprints for enhanced collaboration between industry and higher
education. Both offer a combination of SMEs, big businesses, universities, and research institutes that
collaborate on R&D.

The Parkville Precinct VIC
The Parkville Precinct is Victoria’s biomedical heartland—where world-class education, research, and
commercialisation intersect to drive healthcare innovation and job creation. Home to over 30 leading institutions,
the precinct supports nearly 73,000 jobs, with projections exceeding 80,000 by the mid-2030s. More than $2.8
billion has been invested in research and healthcare infrastructure over the past decade, reinforcing its position
as a cornerstone of Australia’s knowledge economy.

22 ACCI Submission: Strategic Examination of Research and Development
At the centre of this ecosystem is the Jumar Bioincubator, co-located within CSL Limited’s Global Headquarters,
showcasing how large corporations can accelerate SME growth through collaboration. As Australia’s first biotech
incubator embedded within a major biopharmaceutical company, Jumar offers early-stage biotech ventures
access to cutting-edge infrastructure, research expertise, and commercial support.

Supported by CSL, the University of Melbourne, WEHI, and Breakthrough Victoria, Jumar connects SMEs—
such as BioGrid Australia and Melbourne Bioinformatics—with broader innovation networks and practical
pathways to commercialisation. This model of strategic co-location enables agile firms to grow alongside
established players, creating a dynamic, collaborative R&D environment.

The impact is tangible: Parkville generates around 20% of Australia’s patent citations and contributes
significantly to the nation’s $10.6 billion biomedical industry—cementing its role in export growth and future
health sovereignty.

The Waite Campus SA
Meanwhile, the University of Adelaide’s Waite Campus houses the largest concentration of agricultural and wine
research and teaching expertise in the Southern Hemisphere. With a vibrant ecosystem of universities,
government agencies, and industry partners, it exemplifies how co-located infrastructure can accelerate
innovation, facilitate translational research, and support sectoral growth. The Waite Research Precinct serves
as a major research and development engine for Australia’s $71 billion agrifood sector. Centred around the
University of Adelaide’s Waite Research Institute, the precinct brings together research-intensive partners who
collectively invest more than $120 million annually into R&D activities supporting innovation in wine, grains,
horticulture, and agricultural biotechnology.

With agriculture accounting for approximately 13 percent of Australia’s GDP and supporting over 1.6 million jobs
across the supply chain, research conducted at Waite plays a direct role in enhancing national productivity, food
security, and climate resilience.

Several SMEs participate in the precinct, including the Analytics for the Australian Grain Industry (AAGI), which
provides analytical services to support grain quality and research; Affinity Labs, which offers scientific services
such as analytical testing and research support for the wine and beverage sectors; and Fluid Enviro, which
specialises in sustainable water and wastewater treatment technologies.

These precincts demonstrate how co-located R&D ecosystems not only accelerate innovation but also generate
tangible economic outcomes through commercial activity, job creation, and export competitiveness.

Innovation Hubs
The business sector would benefit from more incubator programs that foster collaboration and creativity.
The Industry Growth Program (IGP) currently supports innovative Australian startups and SMEs to commercialise their ideas and scale their businesses through expert advice and matched grant funding.
Open for applications until 2026–27, the program has successfully delivered advisory services to startups and SMEs pursuing commercialisation and growth projects aligned with the National Reconstruction
Fund’s (NRF) 20 priority areas—strengthening Australia’s future manufacturing capability.
However, ACCI believes the IGP model could be refocused to establish innovation hubs with a bigger scale and broader scope of potential projects that might not fall under the NRF’s priority areas, as

20 Department of Industry, Science and Resources. (2024). Industry Growth Program. Australian Government.
https://www.industry.gov.au/science-technology-and-innovation/industry-innovation/industry-growth-program

23 ACCI Submission: Strategic Examination of Research and Development
recommended during the 2023 IGP consultation. These hubs could operate in partnership with CRCs, serving as incubators to support capability uplift and facilitate the translation of basic and applied research into commercially viable developments.
Innovation hubs would offer long-term benefits by deepening industry–university collaboration, expanding
SME capabilities, and creating a stronger pipeline of R&D talent, as well as providing place-based opportunities for collaboration and inspiration. SMEs would be supported to scale their businesses through access to research expertise, mentoring, professional services, seed funding, and research- trained staff. Operating in parallel with CRCs, innovation hubs would also provide universities and training institutions with insight into the practical applications of research. This would enhance higher education outcomes for future R&D workers and improve SME employee capabilities through exposure to new ideas and academic knowledge. Co-locating businesses with similar focus areas alongside research institutions would strengthen their R&D capabilities and improve their prospects for commercial success in global markets.

Case Study: Sydney’s Tech Central Precinct

Afterpay’s continued success is underpinned by its commitment to continuous innovation. Its recent relocation
to Sydney’s Tech Central Precinct—a thriving hub for technology, research, and entrepreneurship—positions
the company at the heart of Australia’s digital economy 21. This move enables Afterpay to collaborate with leading
technology companies, research institutions, and innovation accelerators, fostering a dynamic environment for
growth, cross-sector innovation, and the development of a strong R&D workforce pipeline for the technology
Case Study: R&D and SME Engagement at Lot Fourteen and Tonsley Innovation District
industry.

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By embedding itself within this innovation ecosystem, Afterpay is well-positioned to remain at the forefront of
fintech and continue reshaping the future of digital payments.

Investing in workforce development

21 Michael Bleby, “Afterpay to Set Up HQ in Sydney’s Tech Central,” Australian Financial Review, December 15, 2021, https://www.afr.com/property/commercial/afterpay-to-set-up-hq-in-sydney-s-tech-central-20211215-p59hsy.

24 ACCI Submission: Strategic Examination of Research and Development
Using higher education to build the R&D workforce pipeline
Australia must re-evaluate how its higher education system prepares the R&D workforce of the future.
Currently, the system is often largely oriented towards developing skills for careers within academia, limiting the flow of talent into industry and contributing to a persistent shortage of R&D-skilled professionals in non-academic sectors. This disconnect weakens national R&D capability and constrains innovation-led growth across the broader economy.
To address this, more deliberate and structured collaboration between higher education and industry is essential. Students at all levels—undergraduate, postgraduate, and doctoral—should be equipped with practical R&D skills that are relevant to commercial environments. This can be achieved by refocusing research training programs to include contemporary R&D methodologies, interdisciplinary problem- solving, and exposure to commercial and applied research environments. Embedding industry placements, collaborative projects, and co-designed curricula will diversify graduate pathways and build a more agile, industry-ready R&D workforce.
As discussed above, this approach could work effectively alongside CRCs and similar collaborative R&D hubs. By creating dedicated spaces that foster collaboration and build research communities around specific industries, these hubs enhance the exchange of ideas between experienced and early-career researchers. This, in turn, facilitates the translation of knowledge into industry-ready R&D and innovation.
Such partnerships also accelerate research commercialisation and can provide SMEs with tailored, research-backed solutions and access to a skilled talent pipeline—potentially through structured research internships within SMEs.
This should be specially encouraged in the regions that will face the most economic transformation in
Australia’s goal of Transition to Net Zero by 2050. Regional communities require the most support in transforming their industries, small businesses and workforce to adjust to the demands of a low-emissions economy —particularly in sectors such as agriculture, mining, manufacturing, and energy—and will need tailored R&D solutions to drive sustainable innovation and economic resilience.

R&D workforce in the regions
Building local R&D capability in the regions through targeted higher education and industry collaboration is critical. It supports economic diversification and helps retain skilled talent in these areas and place- based research that directly addresses the needs of the regional communities—ensuring the benefits of the energy transition are shared equitably. Encouraging universities and industry to co-design research training programs with a regional focus would empower local students, businesses, and communities to actively shape and benefit from the net zero economy so they are not left behind.
The Regional University Study Hubs could be ground zero for building R&D capabilities in the regions.
Currently, Regional University Study Hubs support students in regional and remote areas by providing access to dedicated physical spaces equipped with high-speed internet, study facilities, and academic support 22. These hubs are designed to enable students to undertake higher education without relocating, while staying connected to their communities, and can also serve as a platform to encourage place-based research that addresses regional needs and priorities.

22 Regional University Study Hubs Network, Home, accessed April 9, 2025, https://regionaluniversitystudyhubsnetwork.edu.au/.

25 ACCI Submission: Strategic Examination of Research and Development
In the context of collaboration with research institutes or industry, these hubs could serve as local education and innovation ecosystems—facilitating partnerships that support regional skills development, applied research, and workforce pathways. Their physical presence and connectivity make them ideal sites for joint initiatives between universities, research organisations, and businesses, particularly in sectors critical to regional economies.

Case Study: The Global Digital Farm – A Model for Regional R&D in the Transition to Net Zero 23

The Global Digital Farm (GDF) at Charles Sturt University (CSU) in Wagga Wagga exemplifies the type of
regionally focused R&D that should be scaled and replicated as Australia moves toward its net zero emissions
target by 2050. Located in a major regional hub, the GDF integrates cutting-edge agri-tech innovation with place-
based research to directly support the transformation of one of Australia’s most emissions-intensive sectors—
agriculture.

Supporting Regional Economic Transformation

As Australia’s net zero transition accelerates, sectors like agriculture, mining, manufacturing, and energy—many
of which are concentrated in regional areas—will experience profound economic change. The GDF plays a vital
role in preparing regional industries for this shift by:
• Piloting precision agriculture and digital tools that improve sustainability and reduce emissions.
• Trialing carbon measurement and retention technologies (e.g. rangelands carbon monitoring) that will
become essential in a carbon-conscious economy.
• Enhancing water use efficiency and resource management, supporting climate resilience in farming
communities.

By developing and demonstrating low-emissions technologies in real-world, commercial settings, the GDF
provides a blueprint for how R&D can de-risk innovation and help regional industries adapt, while creating new
economic opportunities.

Building Regional R&D Workforce and Capability

The GDF is also a powerful example of how regional universities can anchor local R&D ecosystems:
• It creates opportunities for students, researchers, and agribusinesses to engage in applied research
close to home.
• Programs such as TRAKKA (a livestock data integration tool) and automated animal sensing directly
involve industry partners, fostering collaboration and workforce development.
• The GDF serves as a site for research training and internships, helping retain talent in regional
communities.

This kind of industry-university co-designed research builds enduring skills pipelines for regional economies and
ensures that innovation is tailored to local needs—whether it's optimising nitrogen use or preventing haystack
fires through satellite sensing.

Equity and Resilience in the Net Zero Transition

Crucially, the GDF shows how regional R&D can deliver shared benefits in the net zero transition:

23 Charles Sturt University, Global Digital Farm, accessed April 9, 2025, https://www.csu.edu.au/global-digital-farm/home.

26 ACCI Submission: Strategic Examination of Research and Development
• It empowers local communities to participate in, rather than be sidelined by, climate-related economic
change.
• By focusing on practical, scalable solutions, it supports both environmental and economic resilience.

If Australia's policy framework encourages the development of similar R&D hubs across diverse regions and
industries, it would help ensure that no community is left behind in the path to net zero.

Informative R&D webinar workshops catering to SMEs
Webinars could be a valuable method of increasing SME capability and access focusing on:
1. Online workshops to increase productivity and profit-enhancing for SME staff to navigate through
the processes of applying for government R&D grants and university collaborations while staying
on-site.
2. Increasing SMEs’ market knowledge so they know where and how to access information
regarding what R&D can and should be commercialised.
Businesses are clear that their staff do not often have the time and expertise to initiate and direct R&D projects because of the administrative red tape. Creating a webinar workshop series that can give tailored and direct answers to their questions might increase SMEs’ ability and willingness to participate in the
R&D sector through collaborating with other businesses, government and universities.
In addition, giving SMEs access to market trends by industry experts allows SMEs to understand the difference between technical feasibility and market desirability, understand the pathways they have for commercialisation and understand successful structures of collaborative arrangements, integrating market knowledge throughout the R&D lifecycle, boosting efficiency and their ability to specialise.
This could be set up similarly to the Commonwealth Government’s Productivity Education and Training
Fund Grant (PET Grant), which was designed to educate businesses in relation to recent industrial relations reforms and to assist businesses in complying with new Federal workplace relations laws. Grants could be provided to business peaks and industry associations who could then provide these training services to SMEs.
All in all, Australia’s R&D policy environment must also be proactive, stable, and accessible. SMEs are unlikely to engage with programs that are short-lived, overly complex, or administratively burdensome.
The more complicated and restrictive the process, the less attractive it becomes as an investment. A stable and inclusive R&D infrastructure would reduce regulatory uncertainty, improve SME engagement, and help build a dynamic R&D ecosystem. By establishing permanent, well-supported R&D policy and infrastructure that foster collaboration and lower participation barriers, the government can unlock the vast potential of SMEs to drive innovation, grow the economy, and strengthen sovereign capability across key sectors.

Recommendations for improving capability, access and the workforce
• Simplify and standardise IP frameworks to help reduce friction, build trust, and unlock more industry-
research partnerships.
• Play a facilitative role in establishing and supporting Cooperative Research Centres to create structured
opportunities for SMEs to engage with universities, research institutions and larger businesses.
• Invest in innovation hubs as incubator programs to work with state governments and local councils, so
SMEs have access to collaborations, novel academic knowledge and market knowledge and experience.

27 ACCI Submission: Strategic Examination of Research and Development
• Incentivise higher education and industry to collaborate on curriculum development that will better equip
the R&D workforce, with particular emphasis on the regional workforce.
• Leverage the Regional Study Hubs to facilitate collaboration between universities, research institutes and
businesses.
• Facilitate business peaks and industry associations to develop training for SMEs to gain information about
R&D opportunities for their companies and gain market knowledge.

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Conclusion
Australia’s R&D system must evolve to support the next generation of innovation. By removing systemic barriers, recognising the true nature of business-led innovation, and making programs more inclusive and predictable, the government can unleash untapped potential across Australia’s economy. ACCI stands ready to work with government, academia, and business to design an R&D system that works for all
Australians.
For further information on this submission or with any queries, please contact Dr Jodie Trembath, Director of Skills, Employment and Small Business on Jodie.Trembath@acci.com.au.

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About ACCI
As the largest and most representative business peak in Australia, the Australian Chamber of Commerce and Industry represents businesses in every state and territory and across all industries. Ranging from small and medium enterprises to the largest companies, our network employs millions of people.
ACCI strives to make Australia the best place in the world to do business – so that Australians have the jobs, living standards and opportunities to which they aspire.
We seek to create an environment in which businesspeople, employees and independent contractors can achieve their potential as part of a dynamic private sector. We encourage entrepreneurship and innovation to achieve prosperity, economic growth, and jobs.
We focus on issues that impact on business, including economics, trade, workplace relations, work health and safety, and employment, education, and training.
We advocate for Australian business in public debate and to policy decision-makers, including ministers, shadow ministers, other members of parliament, ministerial policy advisors, public servants, regulators and other national agencies. We represent Australian business in international forums.
We represent the broad interests of the private sector rather than individual clients or a narrow sectional interest.

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