Deep Tech Industry Urges Rethinking of R&D Tax Incentive Changes
Synopsis
Australia's deep tech, biotech and medtech sectors are calling on the federal government to reconsider proposed changes to the R&D Tax Incentive, warning the reforms could undermine innovation and commercialisation.
Key Highlights
- 17 industry organisations have urged the federal government to rethink proposed changes to the Research and Development Tax Incentive (RDTI)
- The reforms threaten commercialisation of deep tech, medtech and life sciences internationally in Australia, the groups say.
- More than requested urgent talks with Treasurer Jim Chalmers before the changes are made law
Deep tech, science and medtech sectors have urged the federal government to revisit proposed changes to the Research and Development Tax Incentive (RDTI), warning that the reforms could harm innovation and see investment stem overseas.
AusBiotech, The Association of Australian Medical Research Institutes (AAMRI), Science & Technology Australia, Cicada Innovations, Medicines Australia and the Medical Technology Association of AustraliaIn a joint letter sent to Treasurer Jim Chalmers about two measures in this month's federal budget where raised their concerns.
Age limit on Refundable Tax Offset
The coalition wants consultation on plans to cap the refundable R&D tax offset for companies under 10 years old and exclude many supporting R&D activities.
In addition to increasing the R&D expenditure cap from $150 million to $200 million and lifting the refundable turnover threshold from $20 million a year to $50 million per year, amongst other changes like raising offset rates for core R&D expenditure and lowering some aspects of the R&D intensity threshold, industry groups are complaining that the proposed age limit doesn’t align with reality when it comes to science-based innovation.
They stated how most deep tech and life sciences companies remain pre-revenue for 10 years, often entering the most critical part of their R&D process, i.e. on the cusp of late-stage clinical trials; as such any federal funding support should start with refundable tax incentives to ensure that ongoing research can be conducted.
Sector Warns Investment Could Shift Overseas
It also warned that non-refundable tax credits after 10 years would offer little help to firms continuing to make a loss, rather than getting immediate payment on costs for R&D because it planned to put the refundable offsets onto a budget plan.
It further cautioned that narrowing the eligibility of support for R&D activities may end up excluding important work like producing goods needed to conduct clinical trials.
Two years ago, Chan, Co and John Martin wrote a letter about the state of Australia’s biotechnology, medical technology and health technology sector; it says that since then, when its size was valued at $31 billion, the fields have doubled in size; employ more than 350,000 people (directly or indirectly); and lead Australia’s biggest value-added industry (outside primary industries).
The organisations added that uncertainty over the reforms is already impacting where companies set up research, clinical programs and manufacturing as well as long-term investment, especially in new sectors such as AI, quantum technology and synthetic biology.
The coalition has demanded an emergency meeting with Treasurer Chalmers and formal consultation before planned RDTI changes are enshrined in legislation
Source: Smart Company
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