Research Australia calls on government to scrap R&D Tax cut

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Research Australia has used its 2020-21 Budget submission to call on the federal government to scrap its proposed cuts to the R&D Tax Incentive and instead focus on enhancing compliance with the program.

The biopharmaceutical sector considers the program one of the most important in encouraging investment in Australian R&D.

The federal government tabled legislation enabling the cuts late last year despite a pre-election Senate inquiry, which was led by a government Senator, that recommended it re-examine the impact of the changes before proceeding.

The changes include fixing the rate of the benefit and the introduction of a simplified premium for conducting ‘high intensity’ R&D for companies with an annual turnover of more than $20 million. The government has agreed to exempt investment in clinical trials from the new $4 million cap on the refundable component.

Research Australia is an alliance of over 150 members and supporters advocating for health and medical research in Australia. Its members include a large number of biopharmaceutical companies.

The organisation has used its 2020-21 Budget submission to urge the federal government not to proceed with the cut and to adopt a range of policies to address the decline in R&D spending.

It says R&D spending has declined over the past ten years from 0.64 per cent of Gross Domestic Product to 0.48 per cent with spending by business falling in some recent years.

It does 'congratulate' the government for its commitment to the Medical Research Future Fund (MRFF). The MRFF will shortly reach its $20 billion target, with disbursements budgeted to reach $580 million in the current financial year, and Research Australia describes this as a "remarkable achievement".

"However, the MRFF does not operate in isolation, and cannot, by itself ensure a vibrant research and development sector," it says, pointing to a "steady decline in real funding" for grants under the National Health and Medical Research Council and the Australian Research Council.

It says the federal government should "outline a plan" with the goal of boosting R&D spending to 0.75 per cent of GDP by the next election, arguing it should focus on data and its utilisation, efficiency and 'smarter' investment.

It urges the federal government to scrap the proposed cuts in the R&D Tax Incentive in favour of improving compliance.

"In the current economic environment of reduced business expenditure on R&D, the Government should not take action to reform the R&D Tax Incentive that could further dampen R&D activity. Instead, the Government should continue with measures to improve compliance with the existing scheme," it says.

Benefits paid under the R&D Tax Incentive program have declined from over $3 billion in 2015-16 and are expected to fall below $2 billion in the current year.