Bill Ferris AC, chair of Innovation and Science Australia, says the organisation favours direct support for business spending on R&D over the current tax incentive.
In a recent speech, Mr Ferris said Australia should look to other countries, including Sweden, Germany, Israel and the US, which rely on direct government support for R&D and provide no incentives.
Industry is still waiting for the Turnbull government's response to the review of the popular R&D Tax Incentive and has expressed significant concern over any possible change that could impact its value and undermine R&D investment. However, according to Mr Ferris, Australia's reliance on the incentive appears to be out of step with other "more innovative" countries.
Government is also considering Innovation and Science Australia's 2030 strategic plan, which argues for the move to direct funding and more focus on education and vocational training.
"The Plan is founded on the belief that innovation is good for Australia. Innovation drives productivity which drives GDP growth and, ultimately, improved living standards," said Mr Ferris.
"I acknowledge there are community concerns about the loss of jobs to innovation and disruptive technologies. We cannot let these fears make us circumspect as a country about championing innovation."