The R&D Tax Incentive Review paper was released on 28th of September, making recommendations on changes to the scheme – including a proposed $2Million cap on the annual cash refund payable under the R&D Tax Incentive. The proposed changes will need to be analysed to assess their full impact on the sector – but it is clear that biotech and medtech companies will be affected by the proposed refundable cap which places a ceiling on the level of innovation support for high-growth potential companies.
Preliminary analysis by BioMelbourne Network indicated that in the biotech sector the R&D tax incentive was fulfilling policy objectives, in terms of driving additional and effective R&D activity and delivering strong economic outcomes in terms of jobs and growth. Of the small data set we have complied to date – more than 40% of biotech companies will be impacted by this proposed $2Million R&D tax incentive cap.
Our recent R&D Tax survey indicated that faced with changes to the R&D Tax Incentive companies may not undertake additional R&D activity, or to move their R&D activity overseas and reduce their overall R&D spend here in Australia. These are the consequences of the proposed changes – putting a handbrake on innovation. Less R&D activity in Australia. Less translation of medical research into medical products. Less opportunity to extend and expand the pipeline of discoveries that are being developed into the cures and therapies of the future. Considering the broader policy focus of the Turnbull Government’s National Science and Innovation Agenda is to drive entrepreneurship and translate good ideas into great businesses – it is perplexing to see proposed changes that limit the support for our most innovative companies.
But it’s not over yet. The uncertainty around future of the R&D tax incentive will continue, with a new round of consultations open till 28th of October, followed by round tables and a further six months until the Turnbull Government will officially respond in March, 2017. What this does is create an opportunity to mount the case outlining why proposed changes R&D Tax Incentive are unnecessary and damaging to the biotech and medtech sector.
The BioMelbourne Network will use this time to continue to build the evidence and provide the case studies needed to demonstrate that for our sector the R&D Tax Incentive is working, is effective, is achieving outcomes and is vital to developing the drugs, diagnostics and devices that will transform the future of health and our economy.
The BioMelbourne Network is once again collaborating with other industry bodies regarding a joint response. In March 2016, these leading organisations prepared a joint submission which can be read here
Here are some other organisations’ initial responses:
Interestingly the Business Council of Australia have used examples of companies from the biotech, medtech and pharma sector in their response here