Manufacturing Modernisation Fund WA 2026: Up to $1 Million

EXECUTIVE SUMMARY: The Manufacturing Modernisation Fund is a $50 million federal co-funding program offering WA manufacturing SMEs grants between $50,000 and $1 million to upgrade equipment, adopt new technologies, and grow skilled workforces. This guide tells you exactly whether you will win or fail before you apply.

Unsure of your eligibility? Check Your Eligibility Probability Here.

Manufacturing Modernisation Fund: At a Glance

What does “co-funded” actually mean for your cash flow? Under the small-scale stream (grants of $50,000 to $100,000), the government covers up to 50% of your eligible project costs. That means a $100,000 project could return $50,000. Under the larger transformative stream (grants of $100,000 to $1 million), the co-funding drops to 25%. A $4 million project upgrade could attract up to $1 million in federal support. You must have the remaining funds available and demonstrable before you submit.

For WA manufacturers navigating a tight labour market and rising input costs, this program represents one of the most significant federal co-investment opportunities available. The catch is that it is merit-assessed and competitive, meaning a technically eligible application can still lose to a better-argued one.

The “Hard” Eligibility Filter: Will You Pass or Fail?

Before you spend a single hour on your application, run yourself through this pre-screening filter. This is the same logic assessors use in Stage 1 of the evaluation process.

Must-Haves (Non-Negotiable)

✅ You are incorporated in Australia. Sole traders, partnerships, and trusts without a corporate structure are ineligible. If your WA manufacturing operation runs through a company registered with ASIC, you pass this gate.

✅ You are a manufacturing SME with up to 199 employees (headcount). The 199-employee ceiling is based on headcount, not full-time equivalents. If you have 180 part-time workers on the floor, you have 180 employees for this purpose. This catches out many WA fabricators and processors who rely heavily on casual labour.

✅ Your project involves genuine modernisation. The fund is not for general maintenance, repairs, or like-for-like equipment replacement. Modernisation includes technology upgrades, energy or process efficiency improvements, and transformative changes that allow you to produce new products or break into new markets. A WA food processing business installing automated portioning and packaging equipment that reduces manual handling by 60% is a strong fit. A business replacing a broken conveyor belt with an identical model is not.

✅ You can demonstrate job creation intent. This is explicitly scored in Merit Criterion 1. You must clearly identify the level of job growth your project will generate. Vague language like “we anticipate growth” will cost you points. Quantify it: “The project will support the creation of four full-time positions in advanced machine operation and quality assurance within 18 months of project completion.”

✅ You have board support documented. A board resolution or equivalent supporting letter is required as evidence. For smaller WA manufacturers operating as a Pty Ltd with a single director, this is a signed statement from that director in their capacity as the company’s governing authority.

✅ You can meet the co-contribution costs. You must prove financial capacity. This typically means recent financial statements, confirmed financing arrangements, or cash reserves that cover the gap between the grant and your total project budget.

Dealbreakers (Automatic Disqualification)

❌ You are not a manufacturer. Distributors, wholesalers, service businesses, and construction firms do not qualify, even if they support the manufacturing sector. Your primary ANZSIC classification matters here.

❌ You have more than 199 employees. There is no grey area. 200 employees means you are out, regardless of turnover.

❌ Your project is already underway or complete. Retrospective funding is not available. Costs incurred before the execution of a grant agreement are ineligible. WA applicants who have already purchased equipment and are hoping to recover costs will be rejected at the eligibility gate.

❌ Your project is purely about maintenance or replacement. As noted above, the fund requires genuine advancement. Patching up ageing assets does not qualify.

❌ You cannot demonstrate financial viability. If your most recent financial statements show insolvency indicators, a history of ATO debt, or insufficient cash flow to cover co-contributions, your application will not progress.

Unsure of your eligibility? Check Your Eligibility Probability Here.

The “Application Killer” Section: 3 Non-Obvious Reasons WA Manufacturers Get Rejected

Passing the eligibility filter is just the beginning. The merit assessment phase is where well-intentioned applications die quietly. Here are the three most common, least-discussed failure points.

1. The “Headcount Trap” for WA Businesses with Labour Hire

Many WA manufacturers, particularly in the resources processing, food production, and metal fabrication sectors, use a combination of direct employees and labour hire workers from agencies. A critical error is assuming that labour hire workers do not count toward your headcount because they are employed by a third party.

In practice, assessors may review the operational reality of your workforce. If you regularly direct, schedule, and supervise 40 labour hire workers alongside 160 direct employees, you risk a finding that your effective workforce exceeds 199. While the guidelines state “employees” rather than “total workforce,” the safest approach is to seek a written clarification from the program administrator before submitting if your combined workforce is anywhere near the ceiling.

A Pilbara-based mineral processing company relying on 120 direct employees and 85 permanent labour hire workers should not assume it sits comfortably under the threshold without advice.

2. The “Incremental Improvement” Narrative Trap

The second killer is subtler. Many applicants describe their modernisation project in terms of what the new equipment does, rather than what it transforms about their business. An assessor reading “we will purchase a new CNC plasma cutting table to replace our existing unit” sees maintenance, not transformation, regardless of the actual capability uplift.

The winning narrative reframes the same investment: “This capital investment transitions our cutting capacity from manual-operator-dependent single-axis cutting to automated, programmable multi-axis precision cutting, enabling us to enter the aerospace component subcontracting market, a segment currently inaccessible to our business. The project directly supports the creation of two specialist CNC programmer roles and positions us to diversify revenue away from our current single-sector exposure.”

The equipment is identical in both descriptions. The narrative quality determines the score. WA manufacturers applying for the transformative stream (grants above $100,000) must make this framing shift or they will score poorly on Merit Criterion 1, which accounts for 40 out of 100 available points.

3. The “Milestone Mismatch” in Your Project Budget

The third killer strikes during the assessment of Merit Criterion 2: capacity, capability and resources to deliver. This criterion also scores 40 out of 100 points and is evaluated partly through your project budget and milestone schedule.

The common error is submitting a lump-sum budget with a vague timeline. Assessors want to see a milestone-by-milestone payment schedule that aligns with demonstrable project progress. A WA metal manufacturer applying for a $600,000 grant who submits a two-line budget (“Equipment: $2 million, Installation: $200,000”) will score far below a competitor who presents a staged project plan showing equipment selection at Month 1, purchase order confirmation at Month 2, delivery and installation at Month 4, workforce reskilling programme at Months 5 to 7, and first production run at Month 8.

The grant agreement itself will ultimately require a milestone schedule. Applicants who build this into their application demonstrate readiness and reduce perceived delivery risk, which directly lifts their Merit Criterion 2 score.

If you need help structuring a business case for grant applications, our guide on business plan templates and grant mentoring support walks through the key components assessors look for in a project narrative.

Step-by-Step Submission Guide: How to Navigate the Portal and Documentation

Unsure of your eligibility? Check Your Eligibility Probability Here.

The Manufacturing Modernisation Fund is administered through the Business Grants Hub portal. Round 1 is now closed, and if Round 2 opens, the application process is expected to follow the same structure. Here is how to prepare so you are ready to move fast when the next round opens.

Step 1: Confirm Your Stream Before You Start

Decide upfront which funding stream you are targeting.

The small-scale stream covers technology and efficiency investments. Grants range from $50,000 to $100,000 and cover up to 50% of eligible project costs. This stream suits WA manufacturers looking to upgrade specific process machinery, automate a single production line, or invest in energy efficiency systems like variable-speed drive motors or upgraded compressors.

The transformative stream covers larger, business-changing investments. Grants range from $100,000 to $1 million and cover up to 25% of eligible project costs. This stream suits manufacturers undertaking a significant pivot: entering a new product category, building a new production facility, or overhauling their entire manufacturing process with advanced automation.

Do not apply for the transformative stream simply because the grant amount is larger. The 25% co-funding rate means your eligible project must be substantially larger, and the narrative burden is significantly higher.

Step 2: Assemble Your Documentation Before Opening the Portal

The single biggest time-wasting mistake applicants make is opening the portal before their documents are ready. The portal has session timeouts and does not always save partial progress reliably. Prepare the following before you log in.

You will need: your ABN and company registration details; your most recent two years of financial statements; a signed board resolution or director’s support statement; a detailed project description addressing all three merit criteria; a milestone-by-milestone project budget; quotes or cost estimates for equipment and services; evidence of workforce reskilling plans (training providers, course outlines, estimated costs); and a clear statement of expected job creation outcomes with supporting rationale.

For WA manufacturers who supply into the defence, resources, or export sectors, evidence of industry endorsements or existing contracts supporting the business case for your project investment will strengthen your Merit Criterion 1 score significantly.

Step 3: Address Each Merit Criterion Directly and Explicitly

Do not leave assessors to infer your merit. Write a section addressing each criterion by name.

Merit Criterion 1 (40 points) asks how your project improves manufacturing competitiveness and drives job growth. This is where your market analysis, competitive positioning, new product or market opportunities, and specific job creation numbers belong.

Merit Criterion 2 (40 points) asks whether you have the capacity to deliver. Your project team credentials, past capital project experience, supplier relationships, milestone schedule, and budget detail all feed into this score.

Merit Criterion 3 (20 points) asks what impact the grant has on your decision to proceed. Be honest and specific. If the grant accelerates your timeline by 18 months, say so. If it is the difference between an Australian-made investment and an offshore outsourcing decision, say that too.

Step 4: Submit and Prepare for Clarification Requests

After submission, the assessment team may contact you for clarifications. Respond promptly and completely. Slow responses or incomplete clarifications can affect your ranking relative to competing applications that respond faster.

If your application is successful, you will receive a written offer and then negotiate a formal grant agreement with the Commonwealth. Payments are made by direct credit according to agreed milestones. If unsuccessful, you are entitled to a debrief, which is valuable intelligence for any future round.

Our guide on government business loans and co-funding programs provides useful context on how federal co-investment programs structure repayment and milestone obligations.

FAQ and Glossary: Answers to the Questions WA Manufacturers Are Actually Searching

Is the Manufacturing Modernisation Fund grant taxable?

Yes. Grants received under this program are assessable income for tax purposes. You must declare the grant in your income tax return for the year it is received. The ATO treats government grants as ordinary income unless a specific exemption applies, and no such exemption exists for this program. Factor this into your project financial modelling and speak with your accountant before accepting any offer.

Can I apply as a sole trader or trust?

No. You must be an entity incorporated in Australia. A company (Pty Ltd or Ltd) registered with ASIC is the standard qualifying structure. If you currently operate as a sole trader or through a family trust, you would need to incorporate before applying. Note that simply incorporating does not make you instantly eligible; assessors will scrutinise the length of your trading history and the viability of your manufacturing operations.

What counts as “manufacturing” for this fund?

The program uses the ANZSIC Division C (Manufacturing) classification. This broadly includes food product manufacturing, beverage and tobacco manufacturing, textile and apparel manufacturing, wood product manufacturing, printing, petroleum and coal products, chemical and polymer manufacturing, non-metallic mineral products, primary metal and metal product manufacturing, fabricated metal products, transport equipment, machinery and equipment, and furniture manufacturing, among others. Mining, construction, agriculture, and wholesale trade are not manufacturing for these purposes.

Can I include labour costs in my project budget?

Eligible expenses under the program include capital expenditure and directly associated reskilling costs. Reskilling and training expenses related to the modernisation project are explicitly listed as eligible. However, general wage costs, ongoing operational labour, and administrative overheads are typically ineligible. The key test is whether the cost is directly attributable to and necessary for the delivery of the funded project.

What is the difference between Round 1 and Round 2?

Round 1 of the Manufacturing Modernisation Fund is now closed to applications. If you are researching this program now, you need to investigate Round 2, which may carry updated eligibility criteria, funding amounts, or co-contribution rates. For manufacturers interested in broader business modernisation funding options while waiting for a new round, our overview of business growth programs and support covers alternative pathways.

How competitive is the program, and what is a “safe” score?

The program is merit-assessed and competitive, meaning your application is ranked against all other eligible applications. There is no published pass score. The assessment committee recommends projects for funding based on relative merit and available funds. Given that the fund is split between two streams with separate pools ($20 million for small-scale and $30 million for large-scale), competition in the transformative stream is typically more intense. The strongest applications consistently score above 80 out of 100 across all three merit criteria.

Is there a minimum turnover requirement?

The published eligibility criteria do not specify a minimum turnover. However, you must demonstrate financial viability and the capacity to meet co-contribution costs. In practice, a manufacturing business generating less than $500,000 in annual revenue would struggle to demonstrate the financial capacity to fund the non-grant portion of a project large enough to meet the minimum $50,000 grant threshold.

Can I apply for both streams?

No. You can only apply for one stream per application round.

Glossary of Key Terms

Co-funding / Co-investment: The arrangement where the government funds a percentage of your project costs and you fund the remainder from your own resources. This is not a loan. The co-funded amount does not need to be repaid provided you meet the grant agreement conditions.

Merit Assessment: The competitive evaluation process where eligible applications are scored against the published merit criteria and ranked for funding recommendation.

Milestone: A defined, verifiable project achievement linked to a payment under your grant agreement. Common milestones include equipment delivery, installation completion, and first commercial production run.

SME (Small to Medium Enterprise): For this program, an SME is defined specifically as a manufacturing entity with up to 199 employees by headcount.

Headcount: The total number of individual employees, counted as whole persons regardless of whether they work full-time, part-time, or casually.

Transformative Investment: A project that fundamentally changes your manufacturing capability, product range, market access, or business model, rather than simply improving the efficiency of existing operations.

For WA manufacturers who are unsure where to start with government funding more broadly, our comprehensive guide to business help and support programs in Australia is a useful first step before committing to a single application.

Unsure of your eligibility? Check Your Eligibility Probability Here.