The Research and Development Tax Incentive is estimated to have generated $9.1 billion in economic activity in the Australian biotech sector in the decade to 2021, according to analysis commissioned by the peak industry body.
Between 2011 and 2021, each dollar of forgone tax revenue from the biotech industry has generated an average return of $2.18 to the economy, according to the analysis undertaken by Deloitte Access Economics using its “in-house computable general equilibrium model”.
In 2021, the estimated return per dollar of tax revenue forgone was $3.14, an increase from the estimated $1.32 in 2013. The report estimated that each dollar of foregone tax revenue in 2011 and 2012 returned less than a dollar of value to the economy.
Total economic impact of the RDTI in 2021 was worth $1.6 billion in 2021, up from $308 million in 2011. The modelling estimated the impact compared to a policy scenario in which the “RDTI was not introduced in 2011.
The report was launched at AusBiotech’s 2023 national conference on Wednesday. Data was retrieved from the S&P Capital IQ and IBISWorld databases.
The report also estimated that RDTI use by the biotech sector has significant annual positive spillovers to other sectors. The two largest beneficiaries were found to be the non-biotech service sector at $292 million per annum and the construction sector at $179 million.
AusBiotech chief executive Lorraine Chiroiu said that demonstrates the importance 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,” Ms Chiroiu said.
There are more than 1,400 biotech companies in Australia employing around 260,000 people, according to AusBiotech. The peak industry body also notes there are 178 biotech firms listed on the ASX with a collective market capitalization of $255 billion.
BioTech firms are those in three main sectors: biotherapeutics, MedTech and digital health, and agriculture and technology, according to AusBiotech.
The Deloitte report also highlighted that 80 per cent of the sector is made up of small businesses, which dedicate a relatively large amount of their resources on R&D. In 2022, the average ratio of R&D expenditure to revenue in 2022 was around 43 per cent.
While small biotech companies account for 11 per cent of revenue, they account for 15 per cent of R&D expenditure. This is compared to large biotech companies, defined in the report as firms with annual revenue of more than $20 million.
Last May the peak industry released a 10-year strategy for the BioTech sector, with the Deloitte report in line with the outlined priorities.
The RDTI is the federal government’s single largest funding initiative supporting R&D, and was estimated to reach a peak in foregone revenue last financial year at $3.2 billion. This comes amid government estimates that Commonwealth spend on R&D as a proportion of GDP hit its lowest compared to data reaching back to 1978-79.
During the most recent round of Senate estimates, it was revealed that software accounted for nearly half of all registrations for the RDTI in the 2021-22 financial year.
The federal government is working on a strategy for the development of an RNA technology industry.
Editors note: This story has been updated to clarify that software, rather than software firms, accounted for nearly half of all registrations for the RDTI in 2021-22.
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