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In an era defined by an ongoing national productivity slump and a fierce global race for tech and industrial sovereignty, Australia’s corporate innovation framework is undergoing a profound structural shift. Navigating government funding is no longer an exercise in retrospective year-end accounting. Instead, securing non-dilutive capital requires a deep, highly proactive synthesis of technical engineering documentation, corporate law, and forward-looking financial strategy.
To unpack this shifting regulatory terrain, we sat down with Sofia Braybrook, Head of R&D and Grants at Lawnch. In this expansive feature, she tears down the myths surrounding “free government money,” explains the critical nuances of the latest Department of Industry, Science and Resources (DISR) guidelines on Artificial Intelligence, and outlines how Australian scale-ups and small-to-medium enterprises (SMEs) must evolve to shield themselves in a hyper-compliant environment.
Question: Sofia, let’s start with the operational realities of your role at Lawnch. When founders and executive teams approach you seeking funding, cash injections, or grants, what do those initial strategic conversations look like behind the scenes?
Sofia Braybrook: The fundamental reality is that while almost every business wants non-dilutive capital to extend their runway, very few enter the room understanding the rigid, uncompromising compliance structures required to secure it. My day-to-day work involves meeting businesses where they are, pulling back the curtain on the R&D Tax Incentive (RDTI), and determining whether their technical projects can genuinely withstand the rigorous legislative definitions enforced by regulators.
A massive psychological hurdle we have to clear early on is moving clients away from the mindset that a government grant or tax offset is just a reactive “cash grab.” It isn’t. Every dollar of government funding demands a meticulous alignment between a company’s technical milestones, its intellectual property (IP) architecture, and the explicit policy objectives of the state or federal program to which they are applying to.
On the R&D side, the overwhelming majority of inquiries come from founders who don’t have a comprehensive grasp of the program. They know they are building something difficult and that it costs them a lot of money, but they do not know how to map that work to the Income Tax Assessment Act 1997.
That is where we come in as translators. Our core value is taking highly complex, cutting-edge software engineering, mechanical design, or biochemical formulation and translating it into a precise, compliant narrative structure. When an assessor from the Department of Industry Science and Resources (DISR) or an auditor from the Australian Taxation Office (ATO) picks up a Lawnch-prepared application, they shouldn’t have to guess what the company is doing. They must instantly see the exact technical uncertainty, the specific hypotheses being tested, the systematic progression of experiments, and the precise metrics used to measure success.
Question: You highlighted software development, and specifically the explosive integration of Artificial Intelligence, as both a dominant driver of R&D claims and an area under intense regulatory scrutiny. Could you break down the specific pitfalls and technical opportunities in the AI space right now?
Sofia Braybrook: Software has historically had a low barrier to entry, making it an incredibly popular sector for R&D claims. You don’t need a multi-million-dollar manufacturing plant or a sterile wet lab; you just need specialised developers and a code repository. However, because of the sheer speed at which generative AI and machine learning have moved over the last few years, the regulators have dramatically pivoted their audit focus toward software claims.
The Department of Industry, Science and Resources (DISR) recently released explicit guidance targeting AI software claims. The most crucial takeaway for any tech company is simple: Merely implementing AI, utilising open-source LLMs, or wrapping a commercial API in a slick user interface does not make your project eligible for the R&D Tax Incentive.
If your company is stitching together existing AI tools, configuring third-party software, or engineering prompts solely to achieve an internal efficiency win – such as automating internal data processing, accelerating administrative reporting, or streamlining customer support routing – it is legally excluded from the RDTI. The legislation explicitly bars internal business administration systems from qualifying as core R&D.
To successfully build a compliant, defensible R&D claim within the software and AI paradigm, companies must rigorously satisfy three core pillars:
| Pillar | Regulatory Requirement | Practical Evidence Required |
| 1. Genuine Technical Uncertainty | The outcome of the development path cannot be deduced or resolved by a competent professional using existing, globally available knowledge. | You must prove you hit a structural wall that standard code libraries, open-source models, or vendor documentation could not solve, requiring you to design an original technical solution from scratch. |
| 2. Global Literature Search | You must demonstrate you searched far and wide—internationally, not just locally—to find an existing solution before investing capital into a custom build. | DISR literally wants to see evidence of your due diligence. This means documentation of technical forum searches, academic literature reviews, patents, or records showing you consulted specialised academic institutions to ensure the solution didn’t already exist. |
| 3. Access to the Technical “Doer” | The conversations and documentation must be driven by the engineers who write the code, not just the commercial founder. | While a commercial founder excels at articulating the market problem and business vision, they rarely hold the granular technical knowledge required to defend an audit. We must pull the core software architects, developers, or data scientists into the conversation to map out the explicit experimental variables. |
As AI continues to evolve, standard integrations that were considered highly novel five years ago are now seen as standard, routine practice. Simple operating system integrations, standard data ingestion pipelines, and generic model fine-tuning are no longer cutting-edge; they are just the baseline of modern software development. Therefore, the specific words, metrics, and technical benchmarks used in your application matter now more than ever.
Question: That requirement for granular accuracy leads directly to how claims must be structurally categorised. The federal budget ecosystem continues to signal a tighter future, tightening of what constitutes an allowable activity. For a scale-up or mid-market business tracking their development expenses, how do you define the legal difference between a Core R&D Activity and a Supporting R&D Activity?
Sofia Braybrook: The modern R&D application form is functionally structured as a pre-audit document. If you cannot cleanly dissect your development sprints into distinct core and supporting classifications, you are exposing your business to catastrophic compliance clawbacks down the line.
Let’s illustrate this critical legislative distinction by using a clear, real-world software example:
1. Isolate the Core Activity: Legislative Focus: Systematic Experimentation.
The core activity is strictly defined as an experimental, systematic progression of work that proceeds from hypothesis to the logging of results, undertaken for the express purpose of generating new knowledge.
Example: Designing, training, and running iterations of a fully proprietary machine learning algorithm to determine whether a novel neural network architecture can achieve 99% data recall accuracy within a strict 2-second time window, where baseline models fail.
2. Identify the Supporting Activities: Legislative Focus: Dominant Purpose Test.
Supporting activities are tasks that are directly related to, or undertaken for the dominant purpose of, enabling that core experimental activity to take place. They do not generate the new knowledge themselves, but the experiment cannot function without them.
Example: The massive administrative and technical task of scraping, cleaning, tokenising, and formatting raw external datasets specifically to feed them through the experimental model during the testing phase.
3.Carve Out the Ineligible Routine Work: Legislative Focus: Complete Statutory Exclusions. You must ruthlessly strip away everyday commercial software development from your claim. Routine bug tracking, cosmetic front-end UI/UX changes, standard web design, minor database migrations, and basic API integrations with common platforms (such as Xero or Shopify) do not involve technical uncertainty and must be excluded from the expenditure log.
Tracking this down to the dollar and the hour is the cost of admission for the program. If your developers are tracking all their time under a generic “Development” bucket in Jira or Harvest without separating the actual experiments from routine maintenance, you have no real way to defend the value of your claim during an ATO review.
Question: Looking at the broader Australian macro environment, we are witnessing a massive government push through initiatives such as the Future Made in Australia agenda, which directs significant capital injections into clean energy, net-zero technologies, and advanced manufacturing. How is this strategic shift altering the traditional dynamic between open entitlement programs like the RDTI and competitive, targeted grants?
Sofia Braybrook: Government funding always mirrors current political policy. Right now, we are seeing a heavy concentration of capital being funnelled into highly specific sovereign capability streams – biofuels, green hydrogen, critical mineral processing, medical technology, and advanced defence manufacturing.
While this is excellent news for companies operating squarely within those chosen sectors, it represents a significant macro tightening for the broader business community. General innovation funding through competitive grant programs has dried up. Programs like the Industry Growth Program (IGP) have undergone dramatic budgetary realignments, and many broad-spectrum business growth funds have wrapped up entirely.
When competitive grant avenues narrow, it deals a heavy blow to innovative businesses that happen to sit outside of those specific policy umbrellas. A software company building an innovative logistics platform or an enterprise SaaS product still costs an immense amount of money, time, and human capital to scale. If they are cut out from competitive grant streams simply because they aren’t building a physical clean-energy asset, where do they turn?
This is precisely why the R&D Tax Incentive remains the undisputed absolute anchor of the Australian innovation ecosystem:
💡 The Non-Discretionary Advantage: Unlike competitive grants, which are merit-based and capped by a finite pool of seasonal funding, the RDTI is a legally enshrined, non-discretionary entitlement program. It spans every industry sector. If your business satisfies the legislative definitions under tax law, the government cannot turn around and tell you they ran out of money or that your industry isn’t currently trendy.
For early-stage scale-ups with an aggregated annual turnover of less than $20 million, the RDTI delivers an invaluable 43.5% refundable tax offset. If your business is pre-revenue or in a tax-loss position, that offset is paid out as a direct cash refund from the ATO. It essentially functions as a non-dilutive government co-investment that rewards companies for taking genuine technical risks on Australian soil.
Question: You frequently counsel executive teams and boards that grants and R&D incentives must be treated as long-term corporate levers rather than sudden windfalls. What explicit methodology do you use at Lawnch to embed this into a company’s operational lifecycle?
Sofia Braybrook: The absolute death knell of a successful funding strategy is looking backward. The era of retrospective grant writing is completely dead. If a business spends 12 months executing a purely commercial development roadmap and then tries to hire a consultant to retroactively “creative write” those completed milestones into an R&D application at tax time, they are taking on a dangerous amount of compliance risk.
At Lawnch, our philosophy centres on working with clients exactly where they are operationally. We know that fast-moving scale-ups do not operate in academic lab coats. They cannot stop their development teams every Friday afternoon to fill out dense, bureaucratic compliance spreadsheets. Imposing artificial corporate structures on a highly agile engineering team simply does not work.
Instead, we focus on seamlessly integrating compliance capture directly into the project management tools they use every day. We help them adjust their existing workflows—whether that means setting up precise tagging hierarchies inside Jira, refining code commit protocols within GitHub, or adjusting time-tracking frameworks to naturally capture experimental intent at the moment the work is performed.
The true power of this proactive approach becomes clear when a company goes out to raise capital. When you can sit down in front of venture capitalists, institutional investors, or board directors and explicitly demonstrate that you have structured your development roadmap to reliably de-risk their investment capital – pulling down hundreds of thousands of dollars in predictable, legally compliant tax refunds – you instantly elevate your company’s valuation.
You are proving to the market that you understand how to maximise your cash runway, protect your corporate IP, and scale your business with maximum capital efficiency.
Question: Let’s look closely at the operational metrics. For a standardised accounting period running on the Australian financial year, what are the hard statutory timelines and structural boundaries that founders must be completely unyielding on?
Sofia Braybrook: When it comes to the R&D Tax Incentive, deadlines are absolute and non-negotiable. For a standard financial year ending on June 30th, your complete registration application must be formally lodged with AusIndustry within exactly 10 months – meaning April 30th is the statutory cutoff. If you miss that date by even a single minute, your right to claim for that entire financial year is permanently lost. There are no extensions for poor planning.
Furthermore, companies must maintain a sharp look at their broader global context. We live in an incredibly fluid, borderless corporate environment. Founders are constantly faced with a critical cost-benefit analysis: Do they employ highly specialised engineers locally in Australia at a premium price point to capture the 43.5% RDTI offset, or do they outsource their development offshore to emerging tech hubs for a fraction of the immediate nominal cost?
Sometimes, after a cold look at the numbers, the answer is that the RDTI is not the right strategic fit for their current stage of growth. If speed to market is your single most critical metric, and utilising an overseas development team gets your product built in half the time for half the cost, a business must have the intellectual honesty to make that choice. They can then look to bring their development pipelines back onshore to build out next-generation iterations once they have achieved stable commercial revenue.
However, if Australia continues to make the regulatory environment overly restrictive, overly burdensome, or hyper-punitive for established entities, we face a very real, systemic threat:
🚨 The Innovation Brain Drain: Founders and private capital are completely location-agnostic. If the compliance burden of participating in Australian innovation programs becomes prohibitive, or if tax policy penalises businesses that have been scaling successfully for more than a decade, innovators will simply pack up and move. They will take their IP, their employment footprint, and their commercial output to jurisdictions such as the US, the EU, or Singapore, where regulatory frameworks are explicitly designed to encourage and protect high-growth tech enterprises.
Our mission at Lawnch is to act as both an enabler and a protective shield for corporate innovators. By establishing ironclad governance structures early, we help Australian businesses secure non-dilutive funding, ensuring that our brightest commercial ideas remain funded, developed, and commercialised right here on our shores.
