The cut to the R&D Tax Incentive will proceed with Labor indicating its support for the Turnbull government's Omnibus Savings Bill.
The Bill including 24 measures totalling around $6 billion in savings. Labor will support the Bill after the Turnbull government agreed to make changes to some of its components in relation to welfare payments and renewable energy.
Labor reversed its longstanding opposition to the R&D tax cut during the recent election campaign.
Under the changes, which will be implemented from the current year and generate $600 million in savings over three years, the rates of the refundable and non-refundable tax offsets for the first $100 million of eligible expenditure will be cut by 1.5 per cent. The refundable rate will drop from 45 per cent to 43.5 per cent and the non-refundable rate will drop from 40 per cent to 38.5 per cent.
The decision to proceed with the cut comes despite significant concern across the life sciences sector, particularly following previous changes and an ongoing review.
AusBiotech has urged government to reconsider the cut and consult more widely given the negative impact on the life sciences sector.
AusBiotech CEO, Mr Glenn Cross, said: “Noting the Labor Party’s negotiations for significant amendments to the Omnibus Bill, it is disappointing that the opportunity was not taken to save the Research and Development Tax (R&D) Incentive in-tact.
“While defending the R&D Tax Incentive and opposing the Coalition's plan to cut the Incentive by 1.5 per cent, right up until the nonsensical turnaround in the election campaign, this was Labor’s chance to right this wrong step.
“In supporting the Omnibus Bill with amendments, the R&D Tax Incentive is to be compromised. The Opposition has – as has the Government - contradicted its clear statements of support regarding innovation and entrepreneurship.
“Both party’s rhetoric has been supportive of optimising the environment for start-up enterprises, which make up the bulk of the Australian life science sector.
“Reducing the benefit of the R&D Tax Incentive will have a direct impact on an area of national competitive advantage, which has responded recently with growth, in large part due the effect of the R&D Tax Incentive.
“The desire for jobs and growth can only be undermined by cutting the most significant programme to promote innovation in this country. It also sends a negative message to our international partners and collaborators, which undermines economic activity in the sector. ”
“AusBiotech calls for the Government to remove the R&D Tax Incentive cut from the Omnibus Savings Bill.”