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Job threat worry over R&D rebate cuts

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April 12, 2018

AusBiotech says changes to research tax incentives would force valuable medical research offshore.

Looming cuts to Australia's research and development tax rebate scheme will force valuable medical research offshore and put jobs at risk, the nation's key biotechnology body is warning.

AusBiotech, Australia's life sciences industry organisation, says changes to the $3 billion research and development tax incentive (RDTI) expected in the May federal budget would force some medical firms to axe research programs and clinical trials.

Chief executive Glenn Cross says the industry will be "damaged in the crossfire" after federal treasurer Scott Morrison flagged plans to crack down on what he called the "mining" of tax incentives by large firms that are not conducting research.

Mr Cross said the changes would limit the amount companies can invest in commercialising medical research and could sway them to conduct clinical trials overseas where better incentives are available.

"Our companies don't rort the system, they do legitimate research and development and we have grown the sector significantly with this incentive," Mr Cross told AAP.

The treasurer has said changes to the RDTI to restrict the amount companies can be refunded will prevent "arbitrary" use of tax incentives and reward those that successfully develop research.

"It is not about writing blank cheques to everyone that has a good idea. That is not the government's role," Mr Morrison said at a business summit in Sydney last week.

Under the current incentive introduced in 2009, a company can claim back 43.5 cents of every dollar spent on medical research.

The expected overhaul follows a review of the RDTI by Innovation and Science Australia in January which recommended changes including a $4 million annual cap on refunds and a $40 million lifetime claim limit.

Mr Cross says such moves will stifle the activities of companies in Australia.

"If their clinical programs can't claim the rebate then they will do some of their work overseas and cut back on research staff here and potentially, hospitals that employ staff for the clinical trial will be impacted as well," he said.

According to AusBiotech, 17 per cent of ASX-listed medical technology and pharmaceutical companies that claim refunds have already reached the $4 million cap, while another nine per cent are in the "danger zone".

One or two companies have hit the $40 million lifetime cap, meaning they would no longer get any rebate and may continue their clinical trials overseas where rebates are still in place.

Mr Cross said the RDTI had been critical for companies such as Sirtex which has provided liver cancer therapies for a number of years, and to Australia's success in attracting overseas investment for commercialisation of medical research.

"By fostering a strong Australian medical technology, pharmaceutical and life sciences research and development sector, we are encouraging the long-term investment in Australia that creates highly-skilled jobs, attracts clinical trials and growths the economy we need," Mr Cross said.

"This cap is going to wind back the five per cent annual growth Australia is achieving in clinical trials and the related jobs that we have seen in Australia since the scheme began."

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