AusBiotech cautions on R&D Tax change


AusBiotech is cautioning the Government against changes to the R&D Tax Incentive that would reduce or dilute the benefit for the biotechnology sector.

Speculation has emerged that the Turnbull Government will announce changes to the highly regarded tax incentive in next week's much anticipated Innovation Statement.

Outgoing Chief Scientist Professor Ian Chubb has suggested changes that would see the incentive reformed into a grants scheme. Professor Chubb argues the change could be designed to encourage closer collaboration between researchers and industry.

A series of government reports have consistently identified the lack of collaboration between researchers and industry as a barrier to the commercialisation of Australian innovation. Proposals to address this issue are expected to feature prominently in next week's Innovation Statement.

AusBiotech CEO Dr Anna Lavelle says that, “While the sector would welcome any change that positively enhances the R&D Tax Incentive, it would oppose any reform that dilutes or further reduces payments under the program. Further, we hold concerns that a grant system increases the compliance for small enterprises and may drive unintended consequences such as ‘phantom’ partnerships.”

The Government has already capped claims under the program and is still seeking to cut the value of the tax incentive by 1.5 per cent.

Dr Lavelle said the incentive provides a valuable benefit to the Australian biotechnology sector given the general difficulty in accessing capital. “If Government is looking to reduce spend on the R&D Tax Incentive, tightening the eligibly criteria would prove more effective than taking the drive form small technology companies.”

"Companies are already facing the uncertainty of the Government's attempt to cut the incentive and further reduction, while it might be well-intentioned, would have a significant and negative impact on our sector's ability to fund R&D," said Dr Lavelle. "Such an outcome would obviously run counter to the Government's stated commitment to support innovation."

According to Dr Lavelle, AusBiotech remains optimistic the Government will announce a set of positive measures in its Innovation Statement that will support further growth in the domestic biotechnology sector.

Former treasurer Joe Hockey announced earlier this year that the future of the R&D Tax Incentive would be considered as part of the Government's Tax White Paper.

Development of the White Paper has been delayed by new Treasurer Scott Morrison.

AusBiotech argued in its submission to the White Paper that preservation of the R&D Tax Incentive was "paramount". It said it ought to be complemented with preferential tax treatment of profit from locally-developed and worked intellectual property via an Australian Innovation and Manufacturing (AIM) Incentive, which it argued would incentivise the retention of economic benefits from innovation on-shore.

The submission also said the Government should consider introducing capital gains tax incentives for investors in pre-revenue and start-up companies, which would encourage ‘patient’ venture capital, along with further improvements to the Employee Share Scheme.