AusBiotech rejects package to further cut R&D Tax Incentive


In response to the ‘Ferris, Finkel, Fraser’ Review of the Research & Development Tax Incentive, AusBiotech says it does not support the proposed changes as a package, as it is a firm belief that this effort to limit or divert the R&D Tax Incentive will damage our hard-won momentum in life sciences, especially the stimulation of the clinical trials environment – and argues that any change ought to exclude and keep from harm R&D in clinical trials.

In particular, AusBiotech opposes the $2 million cap on the refundable claimants. The submission said the proposed package does not support the typical biotech SME, the engine room of Australian biotechnology. It will disproportionally disadvantages the sector and in turn impact the entire development pipeline and ecosystem in Australian life sciences. Any measure that compromises SME growth is unpalatable and nonsensical.

Comments from the Report’s authors, since its launch, that the impact of this measure will be “slight” or that other policy measures, like the investor incentive or the Biomedical Translation Fund, will balance out, fail to understand the impact that is likely in the SME biotechnology sector, its broader ecosystem, or the nature of clinical trials.

The submission also notes the damaging nature of the constant reviews, threats and tweaks to the R&D Tax Incentive that are unsettling for biotechnology developers, who have long development cycles - and undermine business confidence.

Pre-revenue companies in tax loss are reliant on access to capital (venture capital, issuing equity, incentives and grants) to complete their R&D programmes and reach commercialisation. Biotechnology development is a long-term activity that requires large investment.

The negative impact that uncertainty of funding support has on product development/innovation companies is destabilising and the Government's programme changes cause one of the greatest costs, in practical terms.

The R&D Tax Incentive has been a game-changer in this process for Australian innovation, especially biotechnology; it has been well targeted to assist and get benefit from this sector and the refundable component is critical to the growth of life sciences innovation in Australia. In-tact preservation of the incentive is top-of-mind in R&D-intensive industries.

The submission quotes a 2016 study of 41 biotechnology companies, by Marieke D'Cruz, The University of Sydney (Has uncertainty with the R&D Tax Incentive affected R&D investment in the Australian biotechnology industry?), which will be released shortly. The study found that:

  • 15 per cent of firm managers said they had changed their R&D investment strategy as a result of the recent activity surrounding the R&D Tax Incentive;
  • 61 per cent of firm managers said their firm would change their R&D investment strategy if the government were to further modify the R&D Tax Incentive;
  • A further 21 per cent stated they were unsure – it would depend on the size of the modification;
  • 59 per cent of firm managers felt that recent activities regarding the R&D Tax

Incentive (including the Review and 1.5 per cent cut) has led them to feel uncertain about the future of the R&D Tax Incentive policy; and

  • 78 per cent stated that the R&D Tax Incentive is either important or very important

to the decision for their firm to undertake research and development in Australia.

Furthermore, indigenous companies have been ramping up their R&D spend over time. The incentive has been working as it should and encouraging additionality (greater amount spent on R&D). The proposed changes will not only impact those already at certain thresholds, mooted for capping, but will discourage those who would otherwise meet them in the coming years.

The full submission can be found here.