November 2016 – BioMelbourne Network response to proposed changes to R&D Tax Incentive

BioMelbourne Network wrote to the Hon Greg Hunt – Minister of Industry, Innovation and Science, on behalf of our members to express serious concern over the impact of proposed changes to the R&D Tax incentive on the biotechnology, medical technology and pharmaceutical sector in Australia.

Particular reference was made to ‘Recommendation 3,’ the proposed $2Million cap on the annual cash refund payable under the R&D Tax Incentive, which will be highly damaging to this innovation-intensive industry.

The Network undertook a member survey that illustrates the highly damaging and long-lasting negative outcomes that the proposed changes to the R&D Tax Incentive will have on the sector – Less R&D activity in Australia, job losses, decreased global competitiveness, reduced academic collaboration, decline in productivity, economic slow-down and less clinical trial activity in Australia. These results are not the desired policy outcomes for Australia particularly as we transition toward a knowledge and innovation led economy.

The BioMelbourne Network submission is attached here and includes the survey results.  In brief:

• 97% of companies rated the R&D Tax Incentive as critical or very important to R&D activities.
• 45% of companies surveyed indicated that their R&D Tax Incentive refund would be over $2Million in FY16 (July 2015 – June 2016).

The economic impact of the proposed $2Million cap on the refundable R&D Tax Incentive:

• 77% would undertake less R&D activity in Australia
• 71% would decrease their clinical trial activity in Australia
• 55% would reduce early stage research programs in Australia
• 74% would reduce late stage research programs in Australia
• 52% would move R&D activity offshore
• 48% of companies would reduce the level of collaboration with research organisations

In terms of job losses:

• More than one third of companies would incur direct job losses (38% surveyed)
• The resulting reduction in the workforce was estimated between 10-25% of employees
• 85% of companies said that the $2Million cap would decrease their current or future outsourced R&D jobs to the wider sector
• Jobs lost would be high-value, high-skilled jobs, including PhD scientists, R&D technical specialists, clinical researchers, medical affairs, analytical chemists and engineers

There has also been significant concern about impact on clinical trials activity and patient access to new life-saving therapies. The BioMelbourne Network Clinical Trials Working Group also made a separate submission focusing on this area – which is attached here for your reference.

We understand that changes to the program may need to be made to ensure it’s long term sustainability, however we highlighted where exemptions or extensions to the cap could be made to support R&D activity which is strategically aligned with Australia’s innovation agenda and is in the national interest – particularly in the biotechnology, medical technology and pharmaceutical sector.

BioMelbourne Network offered to work with Minister Hunt and the Department and with our members, to model and explore how proposed options would impact our sector – as the industry leaders who participated in our survey have indicated they are willing to participate in further consultation.  Minister Hunt has accepted this offer and we look forward to working with him alongside our members.

 

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