Call for transitional arrangements for R&D Tax incentive cap

The passage of legislation last week to cap claims on the Research and Development (R&D) Tax Incentive and its retrospective application to 1 July 2014 has prompted calls for the government to provide transitional arrangements for biotech companies abandoned in a difficult position.

The Tax Laws Amendment (Research and Development) Bill 2013 was initially introduced by the federal government to exclude companies with a $20 billion turnover from accessing the R&D Tax Incentive - but in a last-minute shock deal, an amendment put by the Palmer United Party was agreed and passed to cap claims at a $100 million of expenditure.

AusBiotech said the change was significant for the Australian innovation ecosystem and will impact many more companies than was originally intended, large and small. It also capped claims retrospectively to include the current tax year, more than halfway through the financial year.

“Companies that have already made investment decisions and committed to R&D programs based on advice or approval for R&D activities in 2014-15 will be left in the lurch,” said AusBiotech CEO Dr Anna Lavelle.

“Transitional arrangements are needed to assist companies that have made commitments based on the program’s provisions and allowed for the 2013 Bill’s original intent before the amendment sent plans awry. The backdating of this latest amendment will cause havoc with planning, create even greater uncertainty and discourage the industry from investing, which needs to be counterbalanced.

“While aimed at large companies, we will see the impacts felt throughout the industry, with more research and development expected to move offshore and the ecosystem that supports small developing companies set to contract as funds are extracted from the sector.

“The plan to take funds out of the reach of innovators and not reinvest them into innovation contradicts the  government’s rhetoric on growing and supporting innovation and the resulting ‘smart’ jobs, where  Australia has competitive strength in pharmaceuticals and medical devices.

“The unrelenting threat to the R&D Tax Incentive and efforts to trim and cap is unsettling for an industry that takes many years to develop each treatment, diagnostic, cure and medical device.”

Companies caught by the sudden and retrospective changes are invited to add ballast to AusBiotech’s representations with company examples. Please contact AusBiotech Communications Manager Lorraine Chiroiu (lchiroiu@ausbiotech.org) if your company is impacted