Australia’s research and development landscape is about to change in a big way. The Australian Government has kicked off an independent strategic examination of research and development to overhaul how the country supports innovation. Final recommendations are due by 31 December 2025. For founders, CFOs and emerging sectors like AI and biotech, what happens next could be the difference between extending your runway and running out of cash.
The Review That Could Reshape Australian Innovation
The Strategic Examination of Research and Development (SERD) is a full-scale review of Australia’s R&D system. It’s being led by an independent panel chaired by Robyn Denholm, you might know her as Tesla’s board chair. She’s working alongside Emeritus Professor Ian Chubb, Professor Fiona Wood and Dr Kate Cornick. These are serious names in Australian science and innovation.
What’s the goal? Boost R&D investment, get better coordination across a system that’s currently all over the place, and align national effort with strategic priorities. It’s ambitious, sure. But the problems they’re trying to fix are just as big.
Here’s how it’s played out so far. A Discussion Paper was dropped in February 2025. Consultation findings came out in July. Then, from late August, six Issues Papers landed, each tackling a different part of the problem. These included national coordination, scaling the RD&I system, R&D incentives, investment and capital, foundational research, and what role the government should play as an innovation exemplar.
Public submissions for these papers closed on 10 October 2025. The turnout? More than 500 submissions and over 600 stakeholders joining roundtables and webinars. For a policy review, that’s massive engagement.
Why Australia Needs This Conversation Now
Let’s start with the numbers. Australia’s overall R&D intensity sits at 1.68% of GDP. Compare that to the OECD average of about 2.7%. We’re not just a bit behind, we’re way behind. Industry groups have been calling for Australia to push toward 3% if we want to stay competitive globally.
But here’s where it gets messier. Australia’s R&D system is spread across more than 150 Commonwealth programs spanning 14 different portfolios. Yes, you read that right. One hundred and fifty programs. If you’re a founder trying to figure out what funding you can access, it can be challenging to navigate that maze.
This fragmentation makes everything harder. Getting different programs to work together? Tough. Translating research into actual products or services? Even tougher. You might have world-class research happening over here, game-changing commercialisation support over there, and capital programs somewhere else entirely. But connecting the dots requires serious bureaucratic skills.
The strategic examination of R&D aims to fix these structural problems, like clearer pathways, better coordination, and more focused support for ambitious R&D activity. Will it work? We’ll see. But at least someone’s finally asking the right questions.
What’s Actually Being Proposed
Rethinking How We Support Business R&D
Here’s one of the biggest changes on the table: a complete rethink of the R&D Tax Incentive (R&DTI). Instead of treating every company the same way, they’re looking at tailoring support based on where you are in your journey. Early-stage start-up? You’d get different treatment than a big established company. The focus would shift toward truly novel, transformational R&D.
They’re also exploring something interesting: extending support to development and deployment activities done in Australia. Right now, the R&DTI is heavily focused on research, but innovation doesn’t stop when the experiment ends. It continues through actually building and deploying something that works.
For start-ups specifically, the proposals include some real wins. Simpler eligibility rules that don’t need a lawyer to interpret. Quarterly advanced payments instead of waiting up to 18 months for your money. Fewer clawback headaches. And, this is big, explicit eligibility for development, deployment, usability and adoption work.
Why does that last bit matter? Because there’s always been this grey zone between “doing research” and “making something customers can actually use.” If the rules expand to cover that middle ground properly, it would match how start-ups really operate.
Opening the Capital Floodgates (Hopefully)
The investment and capital paper tackles a painful reality: Australia doesn’t have enough venture capital, especially for deep tech companies. The proposals include creating a national Angel Investment Board and lifting caps on Early Stage Venture Capital Limited Partnerships (ESVCLPs) from $200 million to potentially $500 million.
Here’s why that matters. Right now, Australian deep tech companies often hit a wall when they need bigger funding rounds. The money just isn’t here at that scale. So they either pack up and go offshore (taking their intellectual property and jobs with them) or they stall out. Bigger fund caps could help keep more of that growth onshore.
The paper also looks at superannuation settings, trying to unlock more “patient capital” for domestic innovation. Australia’s super system is one of the world’s largest pools of managed money, but it’s mostly sitting on the sidelines when it comes to early-stage innovation. Changing that could be huge.
Focus, Focus, Focus
Instead of trying to support everything everywhere, the examination proposes picking five or fewer long-term focus areas and really going after them. Think less “let’s sprinkle funding around” and more “let’s make strategic bets.”
What would those areas be? Examples include defence, health, agriculture, energy and resources, areas where Australia already has genuine strength. Plus cross-cutting technologies like artificial intelligence. The idea is to concentrate resources, build specialist expertise, and create clearer pathways for R&D claims that line up with national priorities.
There’s even talk about offering premium support and extra help for work in these designated areas. Whether that happens, and whether the government picks the right areas, will determine if this creates genuine momentum or just new silos.
Not Forgetting the Fundamentals
While everyone’s excited about commercialisation, the papers make a point about keeping core funding for discovery research strong. That’s important. You can’t commercialise what hasn’t been discovered yet. Basic research often takes decades before showing practical value, but it’s the foundation everything else builds on.
The papers also want clearer roles for publicly funded research agencies and better ways for the government to actually use innovation itself. Government as an exemplar, walking the walk instead of just talking about innovation, could create real pull-through if done right.
Who Actually Benefits From All This?
Start-Ups: Less Red Tape, More Runway
For early-stage companies, these proposed changes could make the R&DTI experience so much better. Simpler eligibility rules mean less time and money spent on compliance. Less uncertainty about what counts and what doesn’t.
Quarterly payments would fix one of the biggest pain points: the cash flow valley of death. Here’s how it works now. You spend money on R&D today. Your tax return gets lodged, if you’re lucky, in 12 months. Your rebate shows up a few months after that. Meanwhile, you’re trying to make payroll and fund your next sprint.
And if the definition of eligible R&D expands to properly include development and deployment work? That just makes sense. Innovation doesn’t stop at the lab bench. It flows through prototyping, user testing, deployment, refinement, and iteration. Recognising that in the incentive structure would finally align policy with reality.
AI and Biotech: Addressing the Deep Tech Gap
The strategic examination of R&D specifically highlights gaps in early-stage venture capital and specialist skills for emerging sectors. The focus area approach and capital reforms target the exact scale problems that deep tech companies face.
For AI companies, treating artificial intelligence as a cross-cutting enabler opens up support across multiple domains. You’re not boxed into being “an AI company.” You might be using AI to tackle problems in health, agriculture, defence or resources. That flexibility matters.
Biotech ventures could benefit from clearer pathways for clinical development work and better access to patient capital when your development timeline is measured in years instead of quarters; having capital that actually understands that timeline becomes make-or-break.
Beyond the Usual Suspects: Sectoral Diversification
Aligning R&D activity with national priorities, things like net-zero transition, healthy communities, environmental protection and security, is designed to spread opportunity across different sectors and regions over the next decade.
This could help emerging industries outside the traditional R&D hotspots. Clean energy in regional Queensland. Advanced manufacturing in South Australia. Ag tech innovation where it matters most, actually on farms. More diverse innovation ecosystems mean more opportunities, more competition, and ultimately better outcomes.
From Policy to Payroll
Where We Stand Today
Here’s the current setup. For the income year starting 1 July 2021, companies under $20 million aggregated turnover can get a refundable offset of the company tax rate plus 18.5 percentage points, that’s 43.5% total right now. Bigger companies get a non-refundable offset with different tiers based on R&D intensity.
This baseline gives valuable support. Australian businesses claimed billions in R&D tax offsets last year. But the timing is a killer. Most companies get their R&DTI benefit when they lodge their tax return, often 12 to 18 months after spending the money. That’s a long wait when you’re burning through cash on innovation.
Bridging the Gap While Policy Evolves
This is where things shift from policy talk to practical reality. No matter what reforms eventually arrive, companies need to fund R&D activity right now. They need to make payroll, pay for cloud computing, fund clinical trials, and manufacture prototype batches.
R&D finance companies offer a solution: they advance your expected R&DTI rebate against the eligible R&D spend you’ve already racked up this year. That means you can access funds to keep your research and development moving, hire critical people, or push your go-to-market timeline forward, without waiting for tax time.
The mechanics are simple. You’re essentially borrowing against money you’ve already earned through eligible R&D activity. It’s not dilutive equity. You’re not giving up board seats or control. You still complete your R&D claims through all the normal channels; the finance just gets you the money faster.
If Quarterly Advances Arrive
Let’s say the proposed quarterly R&DTI payment model actually gets implemented. R&D finance would still have a role. You could pair those quarterly government payments with bridge financing to smooth out lumpy costs, sprint plans, clinical trials, deployment phases, whatever has an uneven cost profile.
Think about AI model development. Your compute costs might spike massively during training runs, then drop way down during evaluation. Or biotech validation, where you might have big upfront costs for trial site setup, then lower ongoing costs while recruiting patients.
R&D finance helps smooth those peaks and valleys. It provides flexible funding that works with your actual R&D activity cycle instead of forcing you to bend your work around funding schedules. As reforms work their way through consultation, legislation and implementation, likely a multi-year journey, that flexibility matters more, not less.
Companies like Rocking Horse lend against incurred, eligible R&D spend so you can access your expected R&DTI earlier and use those funds flexibly for growth. Usually, these arrangements don’t need personal guarantees. You don’t have to finish your R&D claims before applying, though you do still need to complete and lodge everything properly with AusIndustry and the ATO on the standard timeline.
Understanding how R&D financing works alongside government incentives helps you make smarter capital decisions, whether policy changes land quickly or slowly.
What to Do Right Now
Final recommendations won’t arrive until 31 December 2025. Any legislative changes would take more time after that. But there are practical steps you can take right now. Waiting for perfect policy clarity? That’s a luxury most start-ups can’t afford.
Map your R&D activities comprehensively.
Go through your current and planned work. What’s core research? What’s development and deployment? This helps you spot what might become eligible if definitions broaden. More importantly, it gives you clarity on what you’re actually doing and why.
Strengthen your documentation discipline.
No matter what policy changes arrive, you’ll need solid evidence of eligible R&D expenditure, technical challenges you tackled, and how you systematically progressed. This isn’t just bureaucracy, it’s protection. Good documentation today makes potential audits tomorrow way less painful.
Model multiple cash-flow scenarios.
Build spreadsheets that account for current R&DTI timing, potential quarterly payments, and how R&D finance could bridge gaps in each case. Run the numbers. What happens if reforms arrive in 12 months? Two years? Never? Figure out your plan B and plan C.
Consider your full capital stack strategically.
Work out how accessing your R&DTI earlier through R&D finance could reduce dilution, extend runway, or let you accelerate critical hires and experiments this income year. Every dollar you can access without giving up equity is a dollar of ownership you keep.
Monitor the consultation timeline actively.
Keep tabs on updates through the Department of Industry, Science and Resources website as the panel wraps up recommendations and the Australian Government responds. Mark those key dates: 10 October 2025 submission deadline, 31 December 2025 final report. Set calendar reminders. This matters to your bottom line.
Maintain compliance discipline religiously.
Keep following existing R&DTI rules through AusIndustry and the ATO. Registration deadlines. Advance and overseas findings when needed. Proper record-keeping. Policy changes won’t apply backward, and your current-year R&D claims still need to meet today’s requirements. Stay compliant.
Frequently Asked Questions
Will R&DTI eligibility definitely change?
Not yet. The Issues Papers are proposals being tested through public consultation. The panel will deliver recommendations by 31 December 2025, and then the Australian Government will decide what to do. Any actual changes need legislative amendment, so implementation could take quite a while. Don’t assume anything changes until legislation passes.
How do I get involved in the consultation?
The submission deadline for the Issues Papers was 10 October 2025, so that window’s closed. But you can track ongoing updates and transparency reports through the Department of Industry, Science and Resources consultation hub and watch as recommendations get released. Industry bodies are also good channels for staying informed and contributing to group feedback.
What sectors might benefit most from the proposed changes?
Start-ups across all sectors could win from simpler eligibility and better cash flow; that’s the horizontal benefit. Vertically, the papers specifically mention AI, biotech, clean energy, advanced manufacturing and ag tech as areas where coordination and capital reforms could speed up growth. But honestly? Clearer rules and faster cash flow help everyone.
Does R&D finance replace the R&DTI?
No. R&D finance gives you early access to money you’re already entitled to through the R&DTI, based on eligible expenditure you’ve incurred. You still complete your R&D claims according to ATO and AusIndustry requirements. The finance complements the R&DTI, it doesn’t replace it. Think of it as an advance, not an alternative.
Can I access R&D finance before lodging my R&D claim?
Yes. You don’t need to have finished your R&D claims before applying for R&D finance. But you do need to be conducting eligible R&D activity during the current income year and keeping proper records. The finance is secured against expected future rebates, based on the eligible spend you’ve already racked up.
So, It’s Better To Be Prepared, Instead Of Predicting
The strategic examination of research is the most thorough look at Australia’s R&D system in years. For Australian businesses, especially start-ups in emerging sectors, the potential reforms signal something important: recognition that innovation support needs to evolve to match how modern companies actually work.
That recognition matters. Policy frameworks built for manufacturing R&D in the 1980s don’t map neatly to AI model development or biotech validation in 2025. The fact that someone’s asking “does this still make sense?” represents real progress.
While we wait for final recommendations and eventual implementation, the fundamentals don’t change. Do genuine R&D activity. Keep strong documentation. Manage cash flow strategically. R&D finance keeps providing a practical bridge between when you spend on innovation and when government support arrives, regardless of how the policy landscape shifts.
Whether reforms end up modest or transformational, companies with robust R&D processes, clear financial models, and flexible funding approaches will be best positioned to grab opportunities as Australia’s R&D system evolves.
Change is coming over the next few years. How much, how fast, and in what form? Still uncertain. But uncertainty is where start-ups live anyway. You’re already comfortable making decisions with imperfect information. Just apply that same skillset to navigating policy evolution, and you’ll be fine.
Ready to unlock the value tied up in your current year’s R&D spend? Rocking Horse provides fast, flexible R&D finance to help you maintain momentum while you wait for your R&DTI rebate. Get started today.
This article provides general information about proposed R&D policy changes and R&D finance options. It is not tax, legal or eligibility advice. For specific guidance on R&D Tax Incentive eligibility and compliance, consult qualified advisors. Rocking Horse provides R&D finance, not R&DTI advisory services.