Australia's leading accounting firms have described the 2014 Federal Budget as a "lost opportunity" that stifles the ability of innovative Australian companies to compete on global scale. Grant Thornton national head of technology and media, Simon Coulton, said the government had overlooked investment in the ICT sector by not providing adequate incentives that encourage businesses to invest in innovation.

"It's a lost opportunity to develop our knowledge based industries and services," he said.

"Government incentives contribute to a safe environment for companies to innovate and commercialise new ideas." The ICT sector will be hit with cuts to key sources of assistance, including the abolition of; Commercialisation Australia, Innovation Investment Fund, Industry Innovation Precincts, Enterprise Connect and Australian Renewable Energy Agency. Coulton said the ICT sector was perfectly positioned to drive the Government's growth agenda through innovation.

"Yet calls from the sector to eradicate rules that stifle these companies' ability to compete on a global stage are still not being heard including continued unfavourable tax treatment of employee share schemes," he said.

"This Budget also reduces the R&D tax offset by 1.5 per cent from July 1, 2014, sending a clear message that innovation is not a priority.

We're seeing companies take their intellectual property and commercialise it offshore where conditions are more supportive," Coulton said.

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The government has kicked in $484 million over five years for the introduction of Entrepreneurs' Infrastructure Programme to simplify the many grants and programs on offer

However, with the abolition of a number of other programs also accessed by start-ups and venture capitalists which trims $845 million over five years, the net effect to the ecosystem is a loss of $361 million.

In a rare bright spot, the government not only ignored the National Commission of Audit's recommendation to scrap the Export Market Development grant but also increased funding of the program by $50 million.

RSM Bird Cameron director, Con Paoliello, said the refundable and non-refundable research and development tax incentives will be reduced by 1.5 per cent to align with the previously announced cut in company tax rate.

"This means that companies undertaking R&D will now need to find additional funding for projects to substitute the R&D tax incentive they were previously receiving," he said.

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"At the same time, the Government has announced a $20 billion medical research fund to be established and funded by $5 out of every $7 of additional patient contribution.

He said the Government had specifically targeted medical research to the exclusion of other sectors.

"RSM Bird Cameron believes this is a missed opportunity for the budget to provide other initiatives to mobilise the economy on an innovation trajectory.

Coulton said, "Alarmingly", global surveys indicated Australia is slipping in its world ranking, lagging much smaller nations. "Inadequate investment in technology and a lack of support for innovation is holding back Australia's productivity and global competitiveness," he said.

"The ICT sector requires long term investment, not short term cost cutting.

"Strong investment in the sector is required to underpin growth throughout a modern digital economy. "It's disappointing that the Federal Budget again failed to deliver any changes that might better support the ICT sector to generate productivity gains and improvements in Australia's competitiveness", said Mr Coulton.

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