The $4 million cap on research and development tax refunds for businesses should be raised in some circumstances, WA Senator Linda Reynolds said on Wednesday.
Businesses from the emerging lithium and battery sector have raised concerns the cap on refunds available for R&D expenditure, introduced in this year's federal budget, would hurt Australia's chances at moving further up the battery supply chain, beyond just mining minerals.
The cash refunds were intended to be used by R&D-heavy businesses to invest back into their operations.
Ms Reynolds led a delegation of industry groups and major lithium mining companies to Canberra this week to garner federal government support of the burgeoning industry, culminating in a round-table discussion with the Resources and Northern Australia Minister Matt Canavan and Trade, Tourism and Investment Minister Steven Ciobo.
She said R&D incentives were brought up at the meeting and there was a case for the government to raise the cap for certain businesses.
"We've got a lot of discussions to go but the case that we are seeking to put to government is that we do need to raise the cap in certain circumstances," she said.
"For example, for remote processing facilities and doing some more research and development for that across remote and regional Western Australia."
Mr Canavan said the government introduced the cap following a review of the suite of R&D incentives available to businesses.
He said the review recommended a cap of $1 million but following industry consultation it was increased to $4 million.
Lithium and battery industry insiders have told Fairfax Media they were concerned eastern states-based MPs and ministers didn't fully grasp the multi-billion dollar potential of the sector, but today's round-table looked to have made some headway.
Mr Ciobo said the government was "absolutley commited" to seeing the expansion of the industry in Australia, even beyond just mining.
"We know the future in relation to lithium, in relation to battery technology, will include Australia potentially being at the forefront of it," he said.
"A key ingredient for us achieving success in this area and what we can do with partners like Japan, like the US, the EU, as well as established partners like China.
"All of us should work constructively to invest in the lithium supply chain, to invest in the rare earths and battery technology, to make sure that we develop an industry that is ultimately going to be good for Australia, good for Australian jobs and for Australian exports."
WA's state Labor government has established a taskforce to capitalise on the emerging battery sector and held industry-wide briefings to inform a lithium and energy materials strategy.