Australia’s biotechnology, medical technology, and health technology sectors face increasing uncertainty following recent changes to government policy that may undermine the country’s standing as a global leader in life sciences. These developments were outlined by Rebekah Cassidy, CEO of AusBiotech, who highlighted concerns over alterations to the Research and Development Tax Incentive (RDTI) introduced in the May 12 federal budget.

Australia’s biotech industry has been a significant contributor to the economy, representing the largest value-add export sector outside of primary industries since 2016. The broader life sciences ecosystem supports more than 350,000 jobs across nearly 3,000 organizations. These sectors have driven critical advancements in health, including the development of vaccines and innovative medical technologies, while attracting international investment and talent.

Historically, strong collaboration between industry and government, coupled with supportive policy frameworks, has enabled homegrown biotech firms to grow and invest with confidence. However, the recent budget amendments have introduced two major changes: the introduction of a 10-year company age limit for access to the refundable R&D tax offset, and the exclusion of "supporting" R&D activities from eligibility for the RDTI across all companies. These modifications were made without prior consultation with industry stakeholders.

The measures are expected to reduce essential cash flow for companies that often operate beyond 10 years without generating revenue. This is particularly problematic given that developing new medicines or advanced therapies typically requires more than a decade, with major investment needed during late-stage clinical trials and manufacturing scale-up phases, which frequently occur well after the 10-year threshold.

Cassidy emphasized that replacing the refundable RDTI offset with a non-refundable tax credit offers limited benefit for many companies, which may have insufficient taxable income to apply the credit against. A recent AusBiotech survey of 59 biotech firms found that 76 percent anticipated moderate to significant impacts from the policy changes, with many considering relocating operations overseas to countries with more favorable economic incentives.

The industry argues that company age is an inadequate measure of research progress or growth potential, and when combined with planned capital gains tax reforms, the new rules collectively threaten to drive later-stage research and development activities offshore. This has already influenced strategic decisions within firms on clinical trial locations, investment deployment, and long-term operational bases, raising concerns about Australia's future competitiveness in the sector.

These developments appear to conflict with previous government policy frameworks, including the 2025 National Health and Medical Research Strategy Issues Paper and the 2024 Medical Science Co-investment Plan, both of which acknowledged the lengthy development timelines, high capital demands, and risks intrinsic to life sciences innovation.

AusBiotech is actively engaging with government and industry stakeholders to explore practical policy solutions that balance fiscal objectives with sector sustainability. Cassidy called for immediate government dialogue to secure certainty for the sector, warning that failure to do so could result in lost technological advances, cancelled clinical programs, company closures, capital flight, and a potential exodus of talent, ultimately compromising Australia’s global leadership in life sciences.