A panel set up by Treasurer Wayne Swan has recommended possible tax cuts for research and development by big business in the government's efforts to plug holes in the country's business tax system.

The move would provide funds for Mr Swan's plan to extend tax relief for small businesses that often suffer losses and to help achieve the Gillard government's target to have a budget surplus by 2013.

The planned tax break cuts would hit firms with turnover of over $20 million a year. These companies get 40 per cent tax offset on research and development spending. If the tax break would not be cut, it would cost the government $1 billion in the current financial year.

However, the amount could even go higher if large companies such as miners and banks make large claims for R & D tax breaks. A member of the panel pointed out that the tax breaks are not major drivers for research and development since these large firms do it anyway.

Mr Swan's office has not commented on the panel's recommendation, but in an economic note, the treasurer said R & D tax breaks enjoyed by Australian companies are among the most lucrative in the world. Some miners claim up to 80 per cent of their total investment spending on one-off projects under the current tax rules.

Large business groups oppose the planned R & D tax break cuts.

"We are in an environment where we are trying to encourage investment in innovation and the like, so we would be concerned about any measure that made it less attractive to invest in important areas of research and development," The Sydney Morning Herald quoted Greg Evans of the Australian Chamber of Commerce and Industry.

"Any reduction in R & D tax credits runs the risk of stifling the kind of expenditure needed to ensure Australia remains at the forefront of mining technology and the global mining services industry," a spokesman for the Minerals Council of Australia warned.

Besides cutting R & D tax breaks, other potential savings measures include tax breaks for borrowing by local subsidiaries of multinationals and depreciation allowances for the oil and gas industry.

The pressure is for the government to balance the budget in six weeks, but Mr Swan is firm that the Gillard government would be able to keep its budget surplus promise.

The government is expected to spend the next few weeks getting its final decision before it announces an expected $1.5 billion surplus.

Mr Swan said that despite the global financial crisis, the Queensland flood and European debt crisis, which has impact Australia's financial standing, the country continues to enjoy a triple A credit rating from the three major financial rating agencies. He said strict fiscal discipline is being exercised to come back to surplus.

If government would be able to achieve a budget surplus, it would send a clear message to the world that Australia is in good nick, Mr Swan said.