The Australian biotechnology sector fears the federal government may move to cap tax refunds on research and development expenditure at $2 million in the upcoming budget, which it says will stymie the clinical development of medical treatments and cost jobs.
AusBiotech, the umbrella group for the local sector, says it opposes a recommendation of a 2016 review of the R&D Tax Incentive that proposes a $2 million cap on the annual cash refund payable.
The R&D Tax Incentive's refundable component is a pivotal enabler of clinical trials, especially for smaller biotechs, AusBiotech said.
Chairman Julie Phillips says the biotech sector has received no information on how the recommendation for a cap is being treated, and it is causing uncertainty in the biotech, medtech and pharmaceutical sector.
"The uncertainty around it is already having an impact, and it will be really quite devastating to our sector and the momentum that it's getting," Ms Phillips said on Wednesday.
Companies in the global biotechnology sector consider where to run clinical trials over a period of two to five years, and they are not going to wait to see what happens in Australia with the proposed cap.
"We've got companies reconsidering whether they run trials in Australia - these are international as well as local companies," Ms Phillips said.
"That affects jobs, and secondarily to that, there's all the infrastructure and support that goes around conducting clinical trials, where there are also jobs.
"Reductions in trials also mean that patients don't get access to those earlier-stage medicines that you tend to get through the trials."
Ms Phillips said the cheapest clinical trials cost between $3 million and $5 million, and could cost up to $25 million per year.
"So a $2 million cap is just going to take the edge off our competitiveness in that area," she said.
As an alternative to the $2 million cap, AusBiotech has proposed an $8.5 million limit.
Ms Phillips said the biotechnology sector needs encouragement, as it is an innovative, sustainable sector creating high value jobs, and employs about 45,000 people.
The current R&D Tax Incentive offers small and medium-sized firms a 43.5 per cent refundable credit on R&D expenditure, and large firms a 38.5 per cent non-refundable credit on R&D expenditure, to a cap of $100 million.
