AusBiotech welcomes a Senate Inquiry for the Bill seeking to seriously reduce the R&D Tax Incentive (RDTI), after calling on the Government to delay the passage of the RDTI reform legislation until the details, mechanics and impacts are better understood and can be mitigated.
The legislation entered the Parliament recently in an inappropriately titled Bill: Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018.
Submissions to the Inquiry close 5 November and the Senate Committee is due to report by 3 December 2018.
CEO of AusBiotech, Lorraine Chiroiu, said: "Hidden in the detail of the RDTI reform package is a 2.5 per cent loss of refund for biotech SMEs, making the Bill strangely titled.
"These vulnerable enterprises, in tax loss, are developing new therapies, devices, vaccines and diagnostics. They are typically companies commercialising medical research that has been publicly-funded and rely on a unique business model where they need intensive and large cash amounts to fund pre-clinical and clinical trials to reach regulatory approval and patients,” said Ms Chiroiu.
The federal government is claiming the changes are in response to the Review of the R&D Tax Incentive 2016 (Ferris, Finkel, Fraser). Yet this cut of benefit for SMEs did not form part of the review’s recommendations.
The new calculation method of the RDTI benefit will see start-up biotechs with turnover under $20 million and in tax loss lose a much-needed portion of their cash refund. Eligible expenditure, previously resulting in a 43.5 per cent claim, will now only be eligible for a 41 per cent refund.
For each $1 million of expenditure the loss will be $25,000 that has to be raised by alternate means.
Ms Chiroiu said: “We urge the Senate to take this opportunity to recalibrate the Bill and consider the potential damage that will be caused to this burgeoning sector and the negative impact on its work in early clinical and pre-clinical trials, if this legislation pushes ahead in its current form.”
AusBiotech also raised concerns about other key issues:
- the mechanics of the widely-welcomed carve out for clinical trials still has many unanswered questions; and,
- larger companies in the sector are grappling with the impacts of a new intensity measure that will see a reduction in support for most, a significant layer of complexity and uncertainty about eligibility added.
The bill can be found online as can information about the Senate inquiry.