The newly-launched ‘Economic impact of the Research & Development Tax Incentive for the biotech industry’, report has quantified the far-reaching impact of the Federal Government’s RDTI programme in Australian biotech, revealing the incentive has generated a return of $3.14 for each dollar of forgone tax revenue spent in 2021.
Developed with Deloitte Access Economics, the report estimates that between 2011 and 2021, the RDTI for the biotech industry increased Australian GDP by an estimated $9.1 billion.
The economic impact has grown over time, increasing more than five times over the period 2011-2021, from $308 million in 2011 to more than $1.6 billion in 2021. This reflects a substantial expansion in company numbers and compounding productivity gains, with the growing R&D base of the industry adding to Australia’s stock of knowledge.
For each dollar of forgone tax revenue, the RDTI has generated an average return of $2.18 for the economy. Similar to the GDP and employment impacts, the return to the economy increases substantially over time, from an estimated $1.32 in 2013 to $3.14 in 2021.
AusBiotech CEO Lorraine Chiroiu says, “This new report demonstrates the value of sustained investment in the sector over time. Highlighted by the compounding productivity gains the RDTI scheme has delivered between 2011-2021, the programme is particularly relevant to the life science sector with its longer lead times and the sector’s pre-revenue characteristics.
“It also showcases what is possible when policy design is fit for purpose and supports the needs of industry. The foresight of the Federal Government to implement such a scheme in 2011 has led to a significant uptick in economic activity which will be felt for decades to come.”
Australia’s biotechnology industry includes more than 1,400 companies and employs over 260,000 people, with 178 companies listed on the ASX representing a market capitalisation of $255 billion. However, most of the sector is made up of small and medium-sized companies, with over 80 percent of companies within this category, and the majority of these being in the pre-revenue and pre-market stage.
The biotech industry thrives on its ability to engage in high value R&D activity, and to support this, the Australian Government has provided various R&D tax incentives through the years, with the transition to the RDTI in 2011 providing more opportunities for smaller companies in the pre-revenue stages to access the incentive and undertake R&D.
The report noted that these relatively small companies have high research and development (R&D) intensity – for small companies, the average ratio of R&D expenditure to revenue in 2022 was around 43 percent.
The benefits of the RDTI for the Australian biotech industry extend beyond those that are quantified in terms of economic outcomes. The innovations from the biotech industry have supported and improved quality of life for many Australians. The case studies in this report demonstrate that the sector is responsible for innovations developed to combat health issues such as cancer detection, diagnosis and treatment, hearing loss and antibiotic resistance, just to name a few examples. The returns from the RDTI for biotech would be even higher if these social benefits were included.
The Australian biotech sector also serves as a catalyst for attracting both domestic and foreign investment. Over the period 2011 to 2021, the industry attracted an estimated $7 billion in additional investment.
The benefits of the RDTI for the Australian biotech industry extend beyond those that are quantified in terms of economic outcomes, with the industry’s innovations having improved quality of life for many Australians. The case studies in this report demonstrate that the sector is responsible for innovations developed to combat health issues such as cancer detection, diagnosis and treatment, hearing loss and antibiotic resistance. It is important to note that returns from the RDTI for biotech would be even higher if these social benefits were quantified and included.
AusBiotech has been a vocal proponent of the RDTI, championing the programme and its significance to Australia’s biotech sector since 2012. AusBiotech, on behalf of industry, advocated to retain the programme after the RDTI Bill proposed amendments to the policy in 2019.
The report delivers on the metric identified in AusBiotech’s Biotechnology Blueprint, Australia’s decadal biotech strategy, Metric 3.1 ‘Return on Investment’ to determine the dollar amount returned for every dollar invested into the biotechnology sector, in turn demonstrating the value add the industry has on the Australian economy. It was launched during the AusBiotech 2023 national conference.
Read the full report here.
