2014 Federal Budget
Celebrating the boost from the Government’s commitment to the $20 billion Medical Research Future Fund (MRFF), life sciences are cautiously optimistic following not so favourable tax reforms.
“The life sciences industry has been granted a great boost by the Government’s commitment to the $20 billion MRFF - the largest medical research fund of its kind in the world.
“Such a commitment will inject billions of funds into Australia’s medical research industry over the coming decade, supporting innovation and leading to the creation of jobs and valuable intellectual property in Australia over the coming years,” said Michael Cunningham, National Head of Life Sciences, Grant Thornton Australia.
While the MRFF is welcomed news for the life sciences sector, other tax reform has not been so kind. Specifically, the R&D refundable tax offset rate will be reduced from 45% to 43.5% from 1 July 2014.
While the Government has tried to justify this change on the basis of the reduction to the corporate tax rate, this ignores the fact that the majority of life sciences companies are not paying tax and are relying directly on the refundable tax offset to partly fund their research programs.
“The R&D tax incentive has been in place for only two years now and we have many life sciences businesses relying on the incentive to continue to fund research and innovate. This change could jeopardise many existing and planned research programs,” said Mr Cunningham.
In addition, despite repeated lobbying, the Government has missed the opportunity to announce tax reforms to improve Australia’s Employee Share Scheme rules and introduce the Australian Innovation and Manufacturing (AIM) incentive.
“The lack of any affirmative action on these two issues is a missed opportunity to further reform the tax landscape confronting the life sciences sector to make Australia more competitive internationally. This inaction could inhibit efforts to attract and retain life sciences business in Australia,” said Mr Cunnigham.
While the announcement of the MRFF will be welcomed by the life sciences industry, the sweet taste may be soured somewhat by the unanticipated reduction in the refundable R&D tax offset rate and the failure to reform to the Employee Share Scheme and the AIM incentive.
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