Is pre-approval the answer for R&D Tax Incentive?


AusBiotech is asking members if pre-approval of claims under the Research and Development Tax Incentive (R&DTI), might be the solution to multiple issues - enabling claimants and the Federal Government to have more certainty over the program and with ease carve out Australia’s medical technology, pharmaceutical (MTP) and life sciences R&D sector to protect it from harm.

In the context of this week’s reports of extremely slow payments of the refundable component, in addition to the Government’s investigation into the ATO that was prompted by the Four Corner’s stories of inexplicably- overturned R&DTI claims and the Treasurer’s plan to “overhaul” the program to restore its “integrity”, the use of the pre-approval mechanisms looms as an obvious solution to multiple issues.    

AusBiotech has flagged in media statements this week that if the Federal Government insists on a $4 million annual cap, the MTP sector should be carved out for protection, as measures to limit the R&D Tax Incentive will inequitably harm MTP-based research and development - which makes up only about eight percent of claims under the R&DTI and has a record of compliance with the rules.

The R&DTI has been critical to Australia’s success in attracting more investment for the commercialisation of medical research because it stretches Australia’s medical-research dollars further, encouraging the long-term investment in Australia that creates highly-skilled jobs, attracts clinical trials and grows the economy.

The overhaul will include unwelcome and potentially damaging changes on the refundable components of the program: a $4 million annual cap; and a lifetime cap of $40 million.

Seventeen percent of ASX-listed MTP companies that claim the refundable component will be affected immediately, with potential flow-on limitations to their R&D programs, and another nine percent are in the danger zone.  

The critical benefit of the R&DTI is the timing and up-front cash-flow benefit of the refundable component, when companies in tax-loss have their highest costs (that of R&D). The immediate benefit to the Australian economy is increased high-skilled jobs and technology value creation - and later, commercialisation revenues return further benefit.

AusBiotech members are invited to provide their views and comments on the R&DTI to Deputy CEO, Lorraine Chiroiu (