AusBiotech is calling on the Government to delay the passage of the R&D Tax Incentive (RDTI) reform legislation until the details, mechanics and impacts are better understood.
The exposure draft legislation and associated explanatory materials are open for consultation until today, outlining the Government’s proposed implementation of the reforms that, if passed into law, will apply retrospectively from 1 July 2018.
CEO of AusBiotech, Lorraine Chiroiu, said: “Despite the welcome protection of clinical trials in RDTI reform package, the details of the definition and eligible expenditure remain uncertain and we now find that biotech and medtech companies claiming refunds will be hit with a 2.5 percent loss of refund as soon as the legislation passes, due to a new calculation method.”
“The double-pronged loss of benefit resulting from the new calculation method and the new intensify measure, along with the uncertainty on how the clinical trials protection will work, creates a serious threat to this important program – and it should not be rushed.”
The new calculation method of the RDTI benefit will see start-up biotechs with turnover under $20 million and in tax loss lose a much-needed portion of their cash refund. Eligible expenditure, previously resulting in a 43.5 percent claim, will now be eligible for only a 41 percent refund. For each $1 million of expenditure the loss will be $25,000.
Larger companies in the sector (turnover over $20 million) are grappling with the impacts of a new intensity measure that will see a reduction in support for most, but more importantly will create a significant layer of complexity with a phasing of benefits, as well as uncertainty about eligibility because the calculation will only be possible post-spend.
The definition of clinical trials, taken from the TGA, is strong for pharmaceutical developers but does not mention devices and is unclear if it would apply. The mechanics of the exemption to the $4 million cap for clinical trials has many unanswered questions about its application, in particular, which expenditure would be considered claimable.
“We urge the Government to consider the potential damage that will be caused to this burgeoning sector and the negative impact on its work in early clinical and pre-clinical trials, if this legislation pushes ahead in its current form.
“The sector’s outcry over the 1.5 percent cut in 2016 is still ringing in my ears and given all the issues, we feel the Bill should be delayed until there is greater clarity on conditions and potential damage,” added Ms Chiroiu.
Today is the last chance for comment and submissions can be emailed direct to Treasury at R&Damendments@treasury.gov.au
The exposure draft legislation, explanatory materials and consultation document are available on the Treasury website.
Members seeking further information should contact Lorraine Chiroiu (email@example.com).