The government is going ahead with its R&D tax rebate changes which it expects to save $1.8 billion a year, infuriating the life sciences sector.

In response, industry body AusBiotech released a report today claiming the changes will slash R&D spending and threaten the viability of businesses in the life sciences sector.

The changes, reintroduced in a Bill on the Research and Development Tax Incentive (RDTI) to Parliament last week, are to make the scheme “more focused towards supporting additional high intensity R&D expenditure”.

The changes will lift the R&D spending threshold from $100m to $150m so large companies can still get some benefit, and remove the sunset clause on this aspect; reduce the rate for companies with an annual turnover of $20m or less from 43.5 per cent to the corporate tax rate plus 13.5 per cent; cap refunds at $4m a year; for larger companies the rate moves from 38.5 per cent to their corporate tax rate and a percentage based on “R&D intensity”.

Spending on clinical trials is still excluded.

AusBiotech was “astonished” to see the Bill reintroduced, as a Senate Committee recommended in February the government defer consideration until “further examination and analysis of the impact is undertaken”.

A survey undertaken by the organisation found that 61 per cent of those surveyed said the proposed changes would not only affect their R&D spending, but would also threaten the sustainability of their businesses.

“Clinical trials are critically important to survey respondents, and particularly to businesses who provide third-party services for clinical trials,” AusBiotech said.

“However, the broader ecosystem shows that the volume of clinical trials is dependent upon the health of companies relying on broader RDTI contributions.”

AusBiotech CEO Lorraine Chiroiu says the organisation is “deeply concerned”.

“The Australian life sciences industry has been caught in the crossfire,” she said.

“The unique environment we work in, and the life-saving and life-improving benefits we bring, must be better considered before these changes cause long-term damage to the industry.”

Australia’s life sciences sector has been built up through the R&D tax rebate, which has turned the country into a global hub for clinical trials and research, attracting people with high-level skills and experience.

As an example, one month before it was taken over in 2018 by Merck for $500m, immune-oncology junior Viralytics received a $6.4m R&D tax refund, which it said would fund its clinical activities into 2020.

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