Australia is at risk of losing research and development done by manufacturers and mining companies to other countries after the budget slashed $1 billion a year from the R&D tax incentive scheme without offsetting increases in grants elsewhere.

The budget saves $2.9 billion on the R&D incentive scheme over 2018-19 to 2020-21 by reducing grant levels for many claimants and beefing up compliance and enforcements measures, including handing Innovation & Science Australia (ISA) the same power as the Australian Tax Office to set precedent on claims under the scheme.