Seventeen major Australian science and technology organisations have jointly requested consultation with Treasurer Jim Chalmers before implementing proposed changes to the R&D Tax Incentive, warning the reforms could drive jobs and intellectual property offshore.
- Refundable R&D tax offsets to be limited to startups under 10 years old
- Industry warns changes threaten biotech, medical tech, and deep tech sectors
- Concerns raised about loss of investment and R&D activities moving offshore
What happened
Seventeen Australian industry organisations, including AusBiotech, AAMRI, and Medicines Australia, sent a letter to Treasurer Jim Chalmers requesting consultation on two proposed amendments to the Research and Development Tax Incentive (RDTI) announced in the recent federal budget. The first change proposes limiting the refundable R&D tax offset to companies less than 10 years old. The second would remove eligibility for certain supporting R&D activities.
These groups support the overall innovation agenda but argue that these specific changes do not align with the realities of science-based innovation, where commercialisation often exceeds ten years. They emphasize that extending timelines of capital-intensive deep tech sectors, such as life sciences, require stable refundable offsets to sustain late-stage development activities vital for breakthroughs.
Why it matters
Limiting refundable tax offsets based on company age risks undermining sectors that have lengthy R&D and commercialisation cycles. Many biotech and medtech companies remain pre-revenue past the 10-year mark and rely heavily on refundable tax credits for stable working capital. The proposed rules could reduce the financial viability of Australian deep tech ventures and discourage long-term investment.
Moreover, excluding supporting R&D activities, such as manufacturing for clinical trials, may unintentionally exclude critical steps in bringing new technologies to market. The industry coalition warns these reforms could trigger a shift of high-value activities, including manufacturing and late-stage development, offshore. This threatens Australia's position in global innovation and jeopardizes jobs in one of the country's fastest growing export sectors.
What to watch next
The industry groups have made their concerns public and continue to seek engagement with the government to refine the proposed RDTI reforms. Stakeholders will be closely watching Treasurer Chalmers’s response and any potential alterations in the policy framework that might ease tensions and better support long-term innovation.
Investors and companies in biotech, AI, quantum, and synthetic biology sectors are already reconsidering investment decisions due to uncertainty about the reform’s impact. The sector's future competitiveness depends on how the government balances fiscal reforms with the unique demands of science and technology commercialization cycles in Australia.