Sector cynical about 'rort' claims

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Suspicion and concern across the life sciences sector following reports claiming widespread 'rorts' of the R&D Tax Incentive.

Fairfax published a report claiming 'millions of dollars' has been rorted from the scheme that provides a tax rebate for companies investing in R&D.

The report said rorts included "claims from bankrupts, a property spruiker and a disgraced businessman."

"Disgraced AFL player agent Ricky Nixon received an R&D tax offset of $153,268 in July 2015.

"It is unknown what research and development was undertaken by Mr Nixon, but in the 2014/15 financial year he was reported to be working on an online sports agency course and a fantasy game called Super Agent," said the report.

Sources in the life sciences sector questioned the tone, substance and timing of the report, suggesting it could be part of a wider attempt to discredit the scheme in advance of government announcing its response to a recent review.

The R&D Tax Incentive program has been under scrutiny and review for several years.

It is popular in the life sciences sector, and widely considered a vital plank in attracting and retaining investment in Australia, because it provides non-diluting capital to companies in the pre-revenue phase of developing new technologies.

The Coalition government has consistently attempted to wind back the value and benefit of the incentive since its election in 2013.

It secured parliamentary support for changes to the program in 2015, including a reduction in the claimable benefit of R&D tax incentive, and then announced a review.

The ‘Ferris, Finkel, Fraser’ review recommended a raft of new changes to the program. The recommendations included a $2 million cap on annual cash claims and the introduction of an 'intensity threshold' under which companies would only receive the non-refundable tax offset if they directed a specified percentage of their total business expenses to R&D.

Most believe the review was driven by a set savings target.

The sector, led by AusBiotech and Medicines Australia, have actively opposed the recommendations. They argue the cap would devastate the local biotechnology sector, shifting investment overseas, undermining government's wider and otherwise supportive innovation agenda.

The sector also challenged an assertion by chief scientist Dr Alan Finkel that the impact of the proposed $2 million cap on the refundable component of the R&D Tax Incentive would be "slight".

In a joint letter, signed by the leaders of Medicines Australia, AusBiotech, the Medical Technology Association of Australia, BioMelbourne Network and Research Australia, the sectors described the R&D Tax Incentive as the most critical "centre-piece program" in the translation of research into treatments, cures, diagnostics, medical devices and vaccines.

One option being argued is for the government to exclude clinical trials from consideration for the $2 million cap, or increase the cap for the life sciences sector in recognition of its unique circumstances.