The Business Council is calling for an overhaul of Australia's research and development expenditure threshold to help make Australia a more competitive place for investment and the commercialisation of new products.
Business Council Chief Executive Bran Black said private sector investment in R&D is critical to lifting productivity and creating more economic growth and jobs.
"The private sector wants to do more Australian R&D, but the policy settings are holding back investment that could transform local products, creating jobs and driving economic growth," Mr Black said.
"Business stands ready to invest but we need to re-think current settings to unleash investment in new products.
"The BCA believes abolishing the R&D expenditure threshold, or at a minimum increasing it to $250 million and indexing it, would create a better incentive for investment."
Mr Black said that while there should be a comprehensive response to the recently announced R&D Review, it is essential that this simple change to the threshold be implemented in the short-term. With the review not reporting until the end of 2025, Australia can't afford to wait to take simple steps like this to kick-start our productivity.
"We need to create market incentives for non-taxpayer funded research, so businesses aren't actively disincentivised from doing more R&D in Australia."
"If the threshold were removed, we could see a flurry of Australian innovations that help solve some of our biggest challenges, including those in defence, energy, health and cyber."
The United States has a R&D spend of 3.5 per cent of GDP, while funding in Israel is more than triple Australia's.
The BCA believes Australia should aspire to a 3 per cent of GDP R&D spend. Currently our R&D spend sits at around 1.7 per cent.
"If we want to diversify our economy, boosting R&D spend via incentives is an important part of building an environment that fosters investment and local innovation," Mr Black said.
The BCA will engage in depth with the R&D review and advocate for a comprehensive and coordinated R&D strategy.
Key components of that strategy need to include fostering collaboration between universities and businesses to support the commercialisation of research ideas; introducing tax incentives, such as a patent box or production tax credits, to encourage local commercialisation of Australian generated innovation in priority sectors; and improving guidance on R&D Tax Incentive transparency data.
