According to a review conducted by three senior public servants, Australia's Research and Development Tax Incentive, a significant chunk of the government's $9 billion of annual support for innovation, is failing to achieve results, lacks accountability and risks becoming unsustainable.
When the Turnbull government established its National Innovation and Science Agenda in late 2015, it recruited Treasury Secretary John Fraser, Innovation Australia chair Bill Ferris and Chief Scientist Alan Finkel to assess the pre-existing tax offset, which dished out $2.95 billion in 2013-14.
The panel found the program, which provides offsets and rebates for research and development spending, "falls short" and made six recommendations they argue would boost its effectiveness, sustainability and integrity.
Mr Ferris, a long-time venture capitalist, said the panelists thought the program was worth keeping but believe their recommendations are key.
They have highlighted a specific need to boost co-operation between research bodies and industry with targeted and increased tax offsets, as well as to tighten up the program's spending to make it more efficient.
"The review panel finds that the program falls short of meeting its stated objectives of additionality and spillovers," the report states, referring to the program's two objectives of encouraging extra R&D and creating wider economic benefits.
Three of the recommendations seek to boost this:
A 20 per cent "collaboration premium" be introduced to encourage large companies to collaborate with research institutions or recruit more STEM PhD graduates.
Introduce a minimum threshold before companies receive benefits.
Increase the maximum expenditure that can be claimed against the tax offset from $100 million to $200 million annually.
The others aim to bolster integrity and sustainability and include clearer guidance on valid R&D spending, cutting costs in the administration of the program and a $2 million cap on the "rapidly growing" annual refunds for smaller companies.
Mr Ferris said stronger guidelines were necessary to stop misinterpretation among the 13,700 registered entities.
