2025-26 Federal Budget Summary
There’s no shortage of analysis post a Federal Budget announcement. We’re dipping our toe with some commentary on how the 2025-26 Federal Budget stacks up in terms of support for Australian companies pursuing R&D, innovation and new technology development.
Overview of Federal Budget Announcements for R&D & Innovation
So how did things fare? Tumbleweeds are probably the best visual image to reflect how R&D and innovation has been viewed (or more aptly ignored) in the 2025-26 Budget. Unfortunately, this year's Federal Budget announcement represents a missed opportunity to lay out a compelling plan for addressing immediate concerns for Australia’s R&D and innovation.
The lack of announcements in this space is frankly astonishing given ongoing discussion of Australia’s lagging R&D performance. In fact, the only thing falling faster than Australia’s R&D global standing seems to be the Federal Government’s statements in the latest budget announcement regarding R&D, innovation, start-ups, entrepreneurs and technology. See below a crude but revealing CTRL+F analysis of recent mentions of these key terms in Budget Overview statements since 2021-22.
| Key Term | 2025-26 Count (Labor) | 2024-25 Count (Labor) | 2023-24 Count (Labor) | 2022-23 v2 Count # (Labor) | 2022-23 v1 Count ## (LNP) | 2021-22 Count (LNP) |
|---|---|---|---|---|---|---|
| R&D | 0 | 2 | 0 | 0 | 0 | 1 |
| Innovation or Innovative | 2 | 8 | 6 | 4 | 2 | 7 |
| Entrepreneur | 1 | 0 | 0 | 1 | 2 | 0 |
| Technology or Technologies | 2 | 12 | 10 | 8 | 11 | 16 |
| Startup | 0 | 0 | 2 | 1 | 0 | 1 |
| TOTAL | 5 | 22 | 18 | 14 | 15 | 25 |
# October 2022 announcement
## May 2022 announcement
That’s five references to these key terms in 2025-26 compared to 15-20 on average since 2021-22. Five. Not great Bob!
Of course, the inclusion of these terms in a 60-70 page Budget Overview is far from a perfect measure of government policy. A recent case in point would be the Turnbull Government’s ‘Innovation Agenda’ which many would view as high on slogans, low on practical outcomes.
Perhaps the recent commencement of the Strategic Examination into Australia’s R&D system has meant the government has decided to let this process take its course before making major R&D-related policy decisions.
R&D Tax Incentive forecasts
Hidden in the detail of the budget papers are some significantly revised projections for the R&D Tax Incentive, the government’s flagship program for supporting industry R&D. The headline is a projected decrease of $640.6mill in program payments over the next five years to 2028-29. This is despite forecasting an initial increase in payments of $55.8mill in 2025-26 and is a major change from last year’s budget forecasts where program payments were slated to increase by $2.6bill through to 2027-28.
| Budget Year | Time Frame | Total Projected Change | Key Drivers |
|---|---|---|---|
| 2024-25 Budget | 2023-24 to 2027-28 | ↑$2.6 billion | • Surge in number and value of claims • Increases in particular for professional, scientific and technical services claims |
| 2025-26 Budget | 2024-25 to 2028-29 | ↓$640.6 million | • Lower than expected number of claims • Impact of tobacco and gambling exclusion possibly in play. |
The broad-based support offered by the R&D Tax Incentive would generally see year-on-year increases in the number of applications and projected outlays. The government has justified the reduced program payment forecast by citing a “lower-than-expected number of claims”.
A partial explanation could be the recent decision to exclude gambling and tobacco related R&D activities. However, this change takes effect from 1 July 2025 raising the question of why increased payments are forecast in 2025-26 before a predicted downturn.
The revised forecast represents a 180-degree turnaround from last year. The 2024-25 Budget identified a predicted $2.6bill increase in payments on the basis of “increases in the overall number and value of expected claims”, in particular in the professional, scientific and technical services sector. What a difference 12 months makes!
Other items to note
While they are limited, here is a snapshot of the 2025-26 Budget announcements that caught our eye with a view to supporting R&D, innovation, new technology investment and commercialisation:
$54 million to accelerate the uptake of modern methods of housing construction (prefabricated and modular housing)
$3 billion to support the production of Australian‑made green metals, like aluminium and iron
Continuing support for clean technology development through the Future Made in Australia Innovation Fund
$56.7 million to provide grants of up to $25,000 for SMEs to support energy upgrades and improve energy efficiency
A $300 million investment to support innovative health and medical research with the aim of tackling some of the most pressing health challenges impacting Australians
$16 million for an Australia-India Trade and Investment Accelerator Fund, helping businesses expand and unlock commercial opportunities in India.
In short, not much to get excited about and a list that many would’ve hoped had included numerous more highlights.
On Thursday, Peter Dutton delivered the Opposition’s Budget reply which included support for the continuation of the Medical Research Future Fund. However, Mr Dutton’s speech did little to redress the imbalance in our ‘key term analysis’ failing to make mention of ‘R&D’, ‘innovation’, ‘start-ups’ and ‘entrepreneurs’, but getting two on the board for ‘technology’ (and sprinkling in one mention each of ‘artificial intelligence’ and ‘automation’).
We now officially move into election mode. Perhaps the Government and Opposition have kept their powder dry. Perhaps both sides of politics are about to wow us with grand plans and inspiring long-term strategies to reinvigorate Australian R&D and innovation. It’s possible right? Right?!?
If you would like to talk more about how we can help you foster your ideas, please don’t hesitate to reach out.