The multibillion-dollar R&D tax incentive should be expanded to offer equity and debt financing from the National Reconstruction Fund to businesses that collaborate with local research institutions, the Group of Eight university lobby has recommended.
The group (Go8), which represents eight universities accounting for most of the sector’s R&D spend, argues that the effectiveness of the R&D tax incentive (RDTI) could be enhanced with an additional tier of support.
The recommendation is one of 12 policy ideas canvassed by the Group of Eight universities in a new decadal roadmap released on Monday, to drive Australia’s proportional R&D spend to three per cent of GDP.
The Go8 roadmap was released as the federal government begins a review of Australia’s research and development system, which will consider national investment targets for R&D.
The uncapped RDTI is popular among businesses and at an estimated cost of $3.37 billion in 2023-24 accounts for the government’s single largest R&D support program. More than 12,000 companies are estimated to make RDTI claims.
Businesses that qualify for the RDTI and have a formal R&D collaboration with an Australian research institution would qualify for equity or debt financing under the National Reconstruction Fund under the Go8 proposal.
Assessment of whether a business is performing R&D activity or engaged in collaboration with a research institution would be administered under existing RDTI arrangements between the Department of Industry, Science, and Resources and the Australian Taxation Office.
The Go8 says that since the RDTI is intended to target “business R&D at the applied/development end of the R&D spectrum”, businesses that meet its parameters also meet the NRF mandate target of a portfolio rate of return two to three per cent higher than the five-year Australian government bond rate.
In the long-term (six to 10-years), the Go8 also recommends the establishment of a Research Future Fund. This would be similar to the $20 billion Medical Research Future Fund, which focuses on translating health and medical research, but would capture all other fields of research.
Go8 chief executive Vicki Thomson said the “ambitious” roadmap to spending three per cent of GDP on R&D “is a national target requiring all parties to come to the table – government, business, industry and universities – and embrace some innovative thinking”.
“With investment in R&D from both government and business in decline, universities have stepped up and expenditure by the higher education sector on R&D has increased from 0.40 per cent of GDP in 2000, to 0.61 per cent of GDP in 2020,” Ms Thomson said.
“Given our reliance on international student fees to fund research and factoring in the current policy mix being imposed on the sector, there’s a limit to how much universities will be able to contribute to R&D in future. We need a whole of nation approach.”
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