Tax changes push biotech and health sectors offside
Some of Australia’s leading health and life sciences organizations are calling on Treasurer Jim Chalmers to review changes to research and development levies proposed in his budget.
Industry advocates say the long-standing move to limit refundable set-off for less established R&D companies is particularly unhelpful, although they are concerned about Dr Chalmers’ latest tax initiatives.
They say restricting the mechanism would ignore the fact that it routinely takes more than a decade to advance life-changing and life-saving health discoveries while navigating clinical, regulatory and market pathways.
Nine biotechnology, medtech and health technology companies have petitioned the comptroller to request an immediate reconsideration.
The incentive, called the research and development tax incentive, is designed to encourage businesses to invest in innovation by allowing them to offset a percentage of eligible R&D costs by reducing their corporate tax liability or receiving a direct cash refund.
At Dr Chalmers’ economic roundtable last July it was said Australia was missing out on a $7 billion a year economic boon by failing to keep up with international R&D investment.
Senior bureaucrats argue that Labour’s negative gearing and capital gains tax changes are likely to have no impact on economic growth or productivity.
But Treasury Secretary Jenny Wilkinson said on Thursday that other changes in the budget, including the RDTI, would provide support.
But it’s a sentiment AusBiotech CEO Rebekah Cassidy says potential changes to RDTI are already creating uncertainty for Australian companies making long-term decisions about where they should undertake clinical development.
“The long periods of time required to develop and translate medical research into healthcare products for patients are not news,” he said in a statement on Saturday.
“It is well understood by industry and government that it routinely takes well over a decade to bring these critical healthcare products to market.”
Ms Cassidy said that in the ministerial document, National Health and Medical Research Strategy Issues 2025, the average time period was 17 years, while the Ministry of Industry, Science and Resources referred to a period of decades.
“Our industry has a long-standing, collaborative working relationship with governments, so we were caught off guard by this proposed change, which took place without any consultation,” he said.
“The proposed tax change does not recognize business timelines or the significant contribution of our industry.”
The biotechnology sector is considered Australia’s largest value-added exporter outside traditional primary industries such as mining and agriculture, supporting more than 350,000 jobs in approximately 3000 organisations.
“We struggle to understand why the government would jeopardize this by making changes that are fundamentally inconsistent with long-held understandings of the commercial, regulatory and market access realities of this important sector,” Ms Cassidy said.
Dr Chalmers’ office has been asked for comment.
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