The report makes six recommendations to improve the effectiveness and integrity of the research and development tax incentive including introducing a premium to encourage university-industry collaboration.

“If Australia is to create the innovative partnerships necessary to compete internationally, a premium tax incentive to encourage businesses to collaborate with universities will be critical,” said Universities Australia’s Chief Executive Belinda Robinson.

“The recommendation for a premium tax incentive to drive increased collaboration was proposed in our submission to the Review of the R&D Tax Incentive and in our Keep It Clever policy statement. We are pleased that the report has endorsed that view,” Ms Robinson said.

“The R&D tax incentive is one of the largest funding sources for research at around $3 billion a year. Despite this investment, Australia lags globally on measures of business innovation and industry collaboration with universities. So there is clearly scope to improve,” she said.

“The whole university sector is committed to building deeper connections with industry. But this must be complemented by incentives to encourage businesses to ‘reach into’ universities.”

“Universities Australia is ready to work with universities, the Government and businesses through the next consultation phases announced today by the Minister for Industry, Innovation and Science Greg Hunt.”

The R&D Tax Incentive Review was undertaken by Mr Bill Ferris AC (Chair of Innovation and Science Australia), Dr Alan Finkel AO (Chief Scientist of Australia) and Mr John Fraser (Treasury Secretary).

The panel made six recommendations to improve the R&D tax incentive:

• A premium rate of up to 20 per cent for collaborative R&D projects with publicly-funded research organisations (such as universities), and for the costs of employing new STEM PhD graduates for the first three years of their employment
• Retaining the current definition of eligible activities and expenses, but developing new guidance to clarify the scope of the program
• A cap of $2 million on the annual cash refund payable under the R&D Tax Incentive
• An intensity threshold of 1 to 2 per cent for larger companies, such that only R&D expenditure in excess of the threshold attracts a benefit
• Increase the expenditure threshold to $200 million should the intensity threshold be introduced
• Investigating options to improve the administration of the R&D Tax Incentive