DIDG – Sovereign Industrial Priorities Stream

Purpose and Program Overview

The Sovereign Industrial Priorities Stream of the Defence Industry Development Grants Program supports Australian small and medium enterprises to invest in manufacturing plant and equipment that directly advances Australia’s Sovereign Defence Industrial Priorities. The stream aims to strengthen sovereign capability, improve industrial resilience and competitiveness, and enhance national security outcomes in priority defence areas.

The broader Defence Industry Development Grants Program has been extended to 2030 with additional funding, bringing total program investment to approximately $250 million. This stream contributes to building the industrial base required to deliver Defence outcomes in strategic priority areas identified in the Defence Industry Development Strategy.

The program assists eligible SMEs to increase capability and capacity so the Australian defence industry can scale in response to priority needs and support long-term Defence requirements.

Key Grant Details

• Grant amount or funding range: $50,000 to $1,000,000 (up to 50% of eligible project expenditure)
• Application open and close dates: Applications accepted on an ongoing basis; current batch for this stream closes 31 August 2026, 11:59 pm AEST
• Eligible industries or business types: Australian SMEs (fewer than 200 employees) operating in defence-related manufacturing and technology aligned with Sovereign Defence Industrial Priorities
• Required co-contributions: 50% cash co-contribution required; other government funding cannot be used for the co-contribution
• Location/state/territory applicability: Projects must be undertaken in Australia; open to eligible entities nationwide

Priority Sectors

Priority sectors align with the Sovereign Defence Industrial Priorities:

• Maintenance, repair, overhaul and upgrade of Australian Defence Force aircraft
• Continuous naval shipbuilding and sustainment (including nuclear-powered submarines)
• Sustainment and enhancement of the combined-arms land system
• Domestic manufacture of guided weapons, explosive ordnance and munitions
• Development and integration of autonomous systems
• Integration and enhancement of battlespace awareness and management systems
• Test and evaluation, certification and systems assurance

Funding Scope

• Minimum grant $50,000; maximum grant $1,000,000 per project (requires minimum $100,000 eligible expenditure)
• Funding covers up to 50% of eligible expenditure for the purchase, leasing, construction, installation or commissioning of manufacturing plant and equipment (including related specialist software)
• Limited related activities such as design, engineering, commissioning, workforce training and accreditations required for initial commissioning may also be supported
• Maximum project duration of 24 months; projects must be completed by 31 March 2028
• Funding is capped at $3 million per recipient (by ABN) over a three-year period

Eligibility Criteria

• Australian Business Number (ABN)
• Registered for GST
• Non-income tax exempt
• SME with fewer than 200 employees
• Entity incorporated in Australia, company limited by guarantee, or incorporated trustee on behalf of a trust
• Account with an Australian financial institution
• Project undertaken in Australia with a clear link to one or more Sovereign Defence Industrial Priorities
• Accountant declaration confirming ability to fund the co-contribution and any ineligible costs
• Not an individual, partnership, overseas organisation, unincorporated association, trust (except via incorporated trustee), or government body
• Not listed on the National Redress Scheme non-joining list or non-compliant with the Workplace Gender Equality Act (where applicable)

Eligible Activities and Expenses

• Buying, leasing, constructing, installing or commissioning manufacturing plant and equipment used directly to develop or deliver programs aligned with the Sovereign Defence Industrial Priorities
• Specialist software required for operation of the plant and equipment
• Design, engineering and commissioning activities required for initial commissioning
• Workforce training and accreditations required for initial commissioning of the equipment
• Related labour, on-costs, contract expenditure and other costs as specified in the grant opportunity guidelines (Appendix A)
• Ineligible activities generally include product development or prototyping, research and development, and manufacturing inputs such as non-recurring engineering (refer to guidelines Appendix B)

Assessment Process

The grant is competitive (open competitive). Applications are first checked against eligibility criteria. Eligible applications are assessed against two merit criteria and must score at least 65% against each criterion to be considered meritorious. Meritorious applications are then ranked competitively primarily on Assessment Criterion 1.

Key evaluation criteria:

• Assessment Criterion 1: Extent to which the project helps the business contribute to one or more Sovereign Defence Industrial Priorities
• Assessment Criterion 2: Capacity, capability and resources to deliver the project and its commercial benefits Value for money and overall merit are also considered. The program delegate makes the final decision.

Recent Program Updates

The Defence Industry Development Grants Program was extended to 2030 with an additional $80 million, bringing total investment to approximately $250 million (announced July 2026). Updated grant opportunity guidelines are expected later in 2026. Until then, the program continues under existing guidelines and Sovereign Defence Industrial Priorities. Minor updates effective from February 2026 include extended timelines for nuclear-powered submarine related projects, streamlined apprenticeship support, modified assessment responsibilities, and clarifications for applicants.

Application Tips

• Confirm all eligibility criteria are met before commencing an application, including the accountant declaration.
• Prepare supporting documents in advance, including quotes for major equipment, evidence of co-contribution capacity, and (if seeking nuclear-powered submarine related funding) a Letter of Support from the Australian Submarine Agency where applicable.
• Clearly demonstrate alignment of the proposed plant and equipment with one or more Sovereign Defence Industrial Priorities and how it will increase capability or capacity.
• Address every assessment criterion and sub-criterion with evidence proportional to project size and grant amount requested.
• Review the full grant opportunity guidelines, sample application form and sample grant agreement before submission.
• Submit via the business.gov.au portal and ensure the application is finalised before the relevant batch closing date.

Where to Get Help

Consider consulting with a professional grant specialist, such as Pattens Group. We offer initial assessments to review your business’s eligibility and evaluate how well your project aligns with the grant’s objectives. You can also visit relevant government websites for application templates and further guidance.