BioMelbourne Network opposes cuts to the R&D Tax Incentive

5 November 2018

BioMelbourne Network has made a submission to the Senate Inquiry regarding the changes to the R&D Tax Incentive as outlined in the Treasury Laws Amendment.

BioMelbourne Network is opposed to the proposed changes to the R&D Tax Incentive which will reduce support for R&D and decrease the competitiveness of Australia as a preferred location for health industry R&D.

The R&D Tax Incentive is a highly valued programme that supports innovative R&D undertaken by Australian businesses – particularly in the Health Industry, which includes pharmaceutical, biotechnology and medical technology companies.

The gross expenditure on R&D in Australia has fallen considerably, and it is feared that as a nation, we are falling behind. Recent OECD statistics show that Australia’s R&D spend has dropped to just 1.9% of GDP, which is well below the OECD average of 2.4%.

While other nations across the world are making commitments to lift R&D spending, the proposed changes to the R&D Tax Incentive outlined here will have a sweeping negative impact on Australian companies’ capacity for investment in R&D.

With national R&D spending in decline, BioMelbourne Network questions the intention to decrease support for R&D and make changes that will reduce the attractiveness of Australia for future R&D investment by business, especially in priority industry growth sectors.

The Government have sought to create net savings by cutting funding for R&D in Australia. This will hamper Australia’s ability to be globally competitive in pharmaceuticals, biotechnology and medical technology, impede Australia’s transition to an innovation-intensive economy and erode the efforts to bring new lifesaving therapies and treatments to patients.

Our overall consideration of the R&D Tax Incentive legislation is that the changes:

  • increase the complexity and introduce significant uncertainty into the programme
  • have not undergone sufficient consultation to determine the impact on innovative R&D intensive companies, such as those in the Health Industry
  • should re-instate the refundable rate to a fixed percentage set at 45% and not be an offset linked to the corporate tax rate
  • create disadvantages for companies who undertake both significant R&D in Australia and manufacturing activities in Australia
  • establish R&D premium rates that will not incentivise R&D and are not globally competitive
  • recognise the importance of clinical trials to Australia, but do not provide a fit-for-purpose definition of clinical trials
  • require greater clarity and understanding of the means of identifying clinical trials expenditure
  • should not be retrospectively introduced from 1 July 2018
  • will be detrimental to Australia’s ability to remain globally competitive in innovative R&D intensive industries, such as pharmaceuticals, biotechnology and medical technology.

Thank you to all our members who have provided comments and case studies for this submission – we know that strong industry engagement is essential to advocate for an R&D Tax Incentive scheme that continues to support R&D in the health industry in Australia.

Read the full BioMelbourne Network submission (PDF, 319 KB)


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