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Cochlear Comments on Australian R&D Tax and Innovation Policy

A recent article in The Australian has outlined comments from Dig Howitt, CEO of Cochlear, who believes Australia is at a crossroads when it comes to commercialising new innovative products.

Howitt noted the country’s current tax regime hinders research and development (R&D), showcasing that Australia needs to enhance its R&D tax incentives to remain globally competitive.

Howitt identifies that Australia’s productivity growth has declined steadily over the past decade. With economic growth on a per-capita basis also declining for the past six quarters, and inflationary pressures further exacerbate the situation.  Productivity is one of the drivers of innovation and new product development. However, Howitt believes that Australia’s regime for supporting product commercialisation is uncompetitive.

Howitt states that Australia’s corporate tax rate is another hurdle to undertaking R&D and instead advocating for incentives targeted at boosting commercialisation. He acknowledges that the current R&D tax incentive  was ‘actually a pretty good system’, but criticises the program’s $150 million expenditure threshold, as this cap limits the incentives utility, especially for larger entities.

Howitt believes that the current system discourages large companies from conducting and investing in significant R&D in Australia, and suggests increasing the threshold to $250 million and eventually moving towards an uncapped system to encourage more extensive activity.

Howitt also advocates revisiting The Patent Box proposal announced (but not legislated) in the 2021 budget by the former government.

Dig Howitt’s comments come ahead of the current Government’s review of Australia’s R&D System which was announced in the May 2025 budget.  Swanson Reed notes the following from these comments:

• • Cochlear is one of Australia’s most successful stories of commercialising R&D, and their comments must be strongly considered by policy makers;
  • Howitt raises a good point that having a cap on expenditure does provide a disincentive for large companies to undertake more R&D once they reach the cap. The original cap placed on the R&D Incentive was as a budget control measure and the cap’s implementation may possibly have played a role in preserving stability of the R&D Incentive for smaller companies;
  • Perhaps consideration could be given to extending the cap for companies that undertake knowledge intensive R&D Activity, as arguably an R&D Activity undertaken by CSL or Cochlear may possibly provide greater spillover than activity undertaken by a large mining company or a bank;
  • Cochlear’s comments indicate that the R&D Tax Incentive, whilst not perfect, is generally well regarded by industry leaders;

Swanson Reed will continue to call for stability in the programme as the cornerstone for business investment in R&D.

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