The AusBiotech-commissioned ‘Economic impact of the Research & Development Tax Incentive (RDTI) for the biotech industry’ report underlines the critical role of the government in developing and retaining fit-for-purpose policy beyond election cycles.
The newly launched report, quantifying the impact of the Federal Government’s R&DTI programme in Australian biotech over 10 years, highlights how the long-term retention of appropriate policies enables compounding productivity and economic gains.
Developed with Deloitte Access Economics and launched at AusBiotech 2023 conference in Brisbane, the report reveals the RDTI generated an average return of $2.18 for each dollar of forgone tax revenue spent between 2011-2021, with the upward trajectory increasing this figure to $3.14 in 2021.
Australia’s biotechnology industry includes more than 1,400 companies. However, most of the sector is made up of small and medium-sized companies, a majority of which are pre-revenue and pre-market stage. The report noted that these relatively small companies have high research and development (R&D) intensity – for small companies, the average ratio of R&D expenditure to revenue in 2022 was around 43 per cent.
To support the volume of high-value R&D activity these companies undertake, the Australian Government has provided various R&D tax incentives through the years, with the transition to the RDTI in 2011 providing more opportunities for smaller companies in the pre-revenue stages to access the incentive and undertake R&D.
Since the RDTI programme was implemented, it has remained largely unchanged over the past ten years. This has provided industry companies with the confidence that the programme will continue to be retained, enabling Australian and offshore companies to forward plan R&D activities and capital requirements for undertaking R&D in Australia.
AusBiotech CEO Lorraine Chiroiu said, “This important piece of work showcases what is possible when policy design is fit for purpose and supports the needs of industry. The report reemphasises that the policy is appropriate and working for the sector, but more importantly, underscores that long-term commitment from Governments to retaining the RDTI programme without change has enabled such industry and economic success.”
The report estimates that between 2011 and 2021, the RDTI for the biotech industry increased Australian GDP by an estimated $9.1 billion.
The economic impact has grown over time, increasing more than five times over the period 2011-2021, from $308 million in 2011 to more than $1.6 billion in 2021. This reflects a substantial expansion in company numbers and compounding productivity gains, with the growing R&D base of the industry adding to Australia’s stock of knowledge.
The benefits of the RDTI for the Australian biotech industry extend beyond those that are quantified in terms of economic outcomes. The innovations from the biotech industry have supported and improved quality of life for many Australians. The case studies in this report demonstrate that the sector is responsible for innovations developed to combat health issues such as cancer detection, diagnosis and treatment, hearing loss and antibiotic resistance, just to name a few examples. The returns from the RDTI for biotech would be even higher if these social benefits were included.
AusBiotech has been a vocal proponent of the RDTI, championing the programme and its significance to Australia’s biotech sector since 2012. AusBiotech, on behalf of industry, advocated to retain the programme after the RDTI Bill proposed amendments to the policy in 2019.
The report contributes to the metric identified in AusBiotech’s Biotechnology Blueprint, Australia’s decadal biotech strategy, Metric 3.1 ‘Return on Investment’ to determine the dollar amount returned for every dollar invested into the biotechnology sector, in turn demonstrating the value add the industry has on the Australian economy.
Read the full report here.