The RDTI's Role in Fostering New Australian Industries
For Australia, a critical pivot towards a diversified, innovation-driven economy is underway, spearheaded by a powerful, yet often unsung, governmental mechanism: the Research and Development Tax Incentive (RDTI).
Far from being a mere financial rebate, the RDTI is proving to be a strategic architect of Australia's industrial future, actively fostering sectors that will define its next wave of growth and contribute to a truly diversified economy.
The core objective of the RDTI is to ignite business innovation, encouraging companies to undertake the risky, often expensive, pursuit of new knowledge and technological breakthroughs.
What a recent deep dive into the FY2021-22 ATO Transparency Report now clearly demonstrates is that this incentive is resonating far beyond traditionally R&D-heavy sectors.
Expanding the horizon of Australian R&D
While sectors inherently reliant on intensive research, such as Biotech/MedTech and Enterprise/Business Software, continue to be significant beneficiaries and leaders in R&D expenditure – a testament to their inherent R&D intensity – the true narrative of the RDTI's impact is far more expansive.
Analysis highlights that roughly 50% of all RDTI engagement stems from a dynamic mix of five key industries, showcasing a healthy, diversified spread of innovative activity that points to the emergence of new economic pillars.
Biotech/MedTech and Enterprise/Business Software remain formidable forces, commanding $1.73 billion and $1.10 billion in total expenditure respectively. Their continuous investment in R&D is indispensable for maintaining Australia's edge in these critical, high-growth domains. However, the surge in claims from other sectors underscores a crucial economic evolution.
Manufacturing/Industrial, with $851 million in total expenditure from over a thousand claimants, demonstrates a vital reinvention of traditional production methods through advanced R&D.
This signifies a move away from legacy processes towards high-tech manufacturing, crucial for maintaining competitiveness and effectively fostering a 'new' form of this established industry. In fact, manufacturing industries occupy 10 of the top 15 patenting sectors in Australia, with computer, electronic, and optical product manufacturing dominating with 3,837 patents between 2015 and 2024, demonstrating a strong orientation toward enhancing traditional industries.
Climate Tech/Clean Tech, a rapidly expanding and societally critical sector, reported $671 million in total expenditure. This indicates a strong leveraging of the RDTI to accelerate the development of sustainable solutions, a clear example of an industry aggressively embracing innovation where it might not have historically been considered a primary R&D focus.
Its growth is a direct reflection of global priorities and Australia's commitment to clean energy, truly representing a burgeoning new industry.
Similarly, Fintech, with $626 million in total expenditure, illustrates how technological advancements are fundamentally reshaping financial services, a sector once characterised by slower adoption rates. This demonstrates the RDTI's role in driving digital transformation across established industries, effectively giving rise to a 'new', more technologically driven financial sector.
The power of the RDTI lies in its ability to dismantle the financial and operational barriers to entry for R&D across these diverse fields. Whether it involves alleviating the burden of substantial Capital Expenditure (CapEx) for physical infrastructure and specialised equipment, or offsetting the considerable costs associated with attracting and retaining top-tier scientific and engineering talent, the incentive makes R&D financially viable where it might otherwise be prohibitive.
A compelling example is Gilmour Space, a company in the Defence/Aerospace sector, which leveraged $37.5 million in RDTI-supported expenditure in FY22 to advance its ambitious goal of building Australia's first orbital rocket – a monumental endeavour that would be almost unimaginable without such government backing, paving the way for a brand new space industry.
Also read: Supercharging Australia's Future: The Transformative Power of R&D Funding
Nurturing the technologies of tomorrow: The AI frontier
Beyond these established and rapidly expanding sectors, the RDTI is also quietly laying the groundwork for Australia's next wave of industries, particularly in Artificial Intelligence (AI). While initial data from FY2021-22 indicated only a modest 10% of claimants referencing AI on their websites, this landscape is poised for dramatic change. Following the exponential adoption of AI technologies since late 2022, AI-related RDTI claims are projected to surge across most industries from FY2022-23 onwards.
This foresight highlights the program's inherent adaptability and its pivotal role in nurturing entirely new technological frontiers. The substantial investments required for high-cost infrastructure, such as powerful GPU compute clusters, and the intense competition for highly specialized AI engineers, mean that sectors focused on Artificial Intelligence will drive significant future R&D expenditure.
The RDTI provides the essential support for businesses to make these critical, often speculative, investments in a nascent but explosively growing field, ensuring Australia is not left behind in the global AI race and fostering AI itself as a foundational new industry.
Recent data from the "Australia’s Artificial Intelligence Ecosystem: Growth and Opportunities" report (June 2025) further underscores Australia's burgeoning AI capabilities. Australian AI-related patents nearly quadrupled from 170 in 2015 to 629 in 2024, and AI-related research publications more than doubled over the same period. In total, Australia generated 4,075 AI patents and 93,302 AI-related scholarly publications between 2015 and 2024. This demonstrates a sustained and accelerating trajectory of AI capability development.
While Australia's absolute AI research output continues to grow substantially, its share of global AI research output gradually declined from 2.6% in 2015 to 1.9% in 2024. This reflects the extraordinary 218% increase in global AI publications during that time (from 206,160 in 2015 to 655,454 in 2024), rather than a decrease in Australian productivity.
Interestingly, Australia shows distinctive AI research strengths. Veterinary science (RTA 1.80) and Arts and humanities (RTA 1.70) lead in Revealed Technology Advantage (RTA), indicating where Australia is comparatively more specialised in AI research than the global average. This demonstrates that AI innovation is emerging organically from existing industrial and academic strengths.
How does the RDTI act as a catalyst for new Australian industries?
The broad and growing participation in the RDTI, particularly from sectors embracing new technologies and those traditionally less R&D-intensive, is fundamental to Australia's long-term economic resilience. More directly, it strategically ensures that innovation is not narrowly concentrated within a handful of areas, which could leave the nation vulnerable to global market shifts. Instead, it actively fosters key areas for national strength, directly contributing to the emergence and robustness of new Australian industries:
Action items for fostering new industries
- Promote new sectoral pathways: Actively encourage businesses across a wide array of emerging and diversifying industries to engage in R&D. This will systematically build a more diversified economic base, reducing reliance on single sectors and establishing multiple, robust engines of growth, thereby creating a stronger, more adaptable economy less susceptible to downturns in any one area.
- Drive global competitiveness in novel fields: Empower Australian companies across disparate fields to develop unique technological advantages within new and evolving markets. This will enable them to compete more effectively on a global scale, transcending niche markets and opening up new export opportunities by leveraging their RDTI-supported innovations.
- Strategically cultivate future industries: Drive sustained investment in nascent and evolving industries through R&D. This proactive approach, exemplified by the R&D funding and support our company provides, will ensure the Australian economy remains at the forefront of technological advancements and is strategically positioned to address tomorrow's complex challenges, from climate change to healthcare advancements, with innovative solutions rooted in these new sectors.
Australia's AI ecosystem: Key characteristics and growth opportunities
Australia's AI ecosystem is characterised by a "dual-track" approach, with private startups driving rapid innovation (1,121 private companies in our sample) and larger public companies powering AI adoption across established industries (412 public companies). The ecosystem demonstrates significant geographical clustering, with 68% of geocoded AI companies located in 25 distinct clusters – Melbourne CBD being the largest with 188 companies. Notably, this clustering often aligns with traditional industry strengths, such as Perth's AI cluster specialising in energy and resources applications (59% of companies in that cluster).
However, a significant challenge lies in translating research into commercial outcomes. Between 2015 and 2024, Australia produced nearly 23 AI research publications for every AI patent, a disparity that highlights a potential "knowledge discovery – product innovation imbalance." This suggests structural barriers in the innovation pipeline that need addressing to fully capitalise on Australia's research prowess.
The demand for AI-related skills is broadening across the Australian labor market, with job postings requiring such skills growing from 0.2% in 2015 to 0.9% in 2024. This demand is particularly high in professional and managerial roles, and notably, Arts and Media professionals saw a dramatic increase in AI skill requirements in 2024, jumping to 7.6% of postings from 0.8% in 2023, largely due to roles focused on training Generative AI models. This indicates a diverse range of AI work clusters emerging across the economy, requiring both technical and complementary non-technical skills like communication and problem-solving.
Despite strong absolute growth in AI capabilities, the Australian AI ecosystem faces intense global competition, particularly from the US, which attracted $166.4 billion in private AI investment in 2024, 11.7 times more than China, the second-largest recipient. Australia received $0.7 billion in private AI investment in 2024.
Stakeholders emphasise the need for a culture shift towards innovation, collaboration, and confidence to accelerate Australia's position as a global AI contributor. This includes strategic investment in foundational research, sovereign technologies, and public-good AI aligned with national priorities in health, environment, and education.
Want to dive deeper into the data? Explore the full insights and comprehensive analysis on the R&D Tax Incentive program in the complete ATO Transparency Report review that Kashcade has put together. Click here to read the full report!
The RDTI transcends its definition as merely a tax benefit; it stands as a cornerstone strategic investment in Australia's future. By incentivising businesses across every facet of the economy to undertake vital R&D, it is actively shaping a more dynamic, robust, and ultimately, a more prosperous innovation landscape for generations to come, ensuring the continuous birth and growth of new Australian industries.