Industry Brief - R&D Tax Incentive - January 2020

Clinical trials protected under proposed amendments to Australia’s R&D Tax Incentive


New draft legislation released by the Australian Government in December has con­firmed its support for companies undertaking clinical trials in Australia in a positive outcome for the country’s billion-dollar biotech industry.


Despite many changes to the R&D Tax Incentive (R&DTI) Program under the draft amendments, clinical trials are the only activities explicitly excluded from a proposed A$4m cap on cash refunds.

Cosec’s CEO Blair Lucas said the latest legislative amendments will provide greater clarity and confidence to life sciences companies seeking to conduct research and development in Australia.

“The strong growth we’re seeing in Australia’s life sciences sector is in part due to the R&D Tax Incentive program as well as our excellent clinical trial services environment,” Mr Lucas said.

“Providing clarity and certainty around clinical trials within the R&D Tax Incentive legislation is important to ensure Australia continues to attract investment and build capability in the life sciences sector.

“Our collaborative partners operating in Australia have welcomed the legislative protections, which explicitly support clinical trial activities and recognise the contribution of the life sciences sector to the economy.”

The proposed legislation will introduce a new mechanism for measuring the incentive amount for claimants with annual group turnover equal to or more than A$20 million. Companies below the A$20 million threshold will continue to be eligible to receive a cash refund, but at a slightly reduced rate of 41% (down from 43.5%). This adjustment (amongst other changes) is designed to produce a net gain to the Federal Budget of around A$1.8bn and will tie the R&DTI rate to the income tax rate.

The amendments will also introduce a series of compliance, enforcement and administration changes to improve the integrity of the R&DTI Program. If passed by the government, these changes will be applied retrospectively from 1 July 2019.

The purpose of these changes is to support measures introduced in the Federal Government's 2018-19 Budget to improve the R&DTI Program to support and reward higher-value and more intensive R&D investment in Australia. The amendments were introduced in late 2019 after the original draft legislation failed to pass the Senate.

Further measures delivered in the draft legislation include:

Parliament resumes in February 2020 where further debate regarding the proposed changes is expected.


For more information contact Blair Lucas, CEO, on +61 403 358 638.