Tax concessions available for research

By Wendy Cramer, Journalist
Wednesday, 07 March, 2007

The R&D Tax Concession is designed to fuel local research and development and is available to all sectors of industry. Best of all, each company controls the direction of its R&D.

This means Australian companies are able to deduct up to 125% of eligible expenditure that is incurred on R&D activities from assessable income when lodging their tax returns.

The concession is administered through AusIndustry on behalf of the Industry Research and Development (IR&D) Board and the Australian Taxation Office (ATO).

Norwood Immunology has recently taken advantage of the concession to fund part of its research into T-cell production in cancer patients.

The company's COO, Dr Suzanne Lipe, believes that the federal and state governments have been a driving factor in achieving excellent quality medical research in Australia. "But it is the important role played by AusIndustry which has been invaluable in moving that research from the proof-of-concept stage to commercial viability," she says.

The Melbourne-based company has partnered with US-based TAP Pharmaceutical Products to bring its local technology to the US market.

Together, they plan to use TAP's drug, Lupron, to improve a patient's compromised immune system to help fight a range of diseases.

Through the assistance of the R&D Tax Concession, Norwood was behind the discovery that Lupron could stimulate T-cell production in the adult thymus gland.

"Support from AusIndustry has enabled Norwood Immunology to think globally and form a strategic alliance with licensing partner TAP, a significant player in the key North American Market," Lipe says.

The technology is based on more than 15 years of research by Associate Professor Richard Boyd and his team at Melbourne's Monash University. Norwood Immunology has entered into a licensing agreement with Monash for the intellectual property rights in the immunology field.

"Medically, it's very exciting because the technology enables the immune system to function optimally. But of 5000 chemical compounds that enter preclinical testing, only five make it to human testing, and only one of these ever gets approved," she says.

Lipe points out that costs can also be prohibitive - as much as $500 million to take a drug to market. "That is why government and investor support is critical in getting projects such as ours through this development stage."

To qualify for the R&D Tax Concession, a company's R&D activities must meet a range of criteria.

  • Systematic, investigative and experimental activities which: involve innovation; involve high levels of technical risk; are carried on for the purpose of acquiring new knowledge; or creating new or improved materials, products, devices, processes or services.
  • Other activities which are directly related to the undertaking of the above activities.
  • The subject of an approved R&D plan.

Companies can claim the concession by completing the ATO R&D Tax Concession Schedule and the relevant labels in their tax return. But before claiming the concession, businesses must be registered by the IR&D Board for that year of income.

A company's annual expenditure on research and development must also be more than $20,000 to qualify - unless the work is contracted to a Registered Research Agency - and all R&D must be undertaken on a company's behalf.

"The experience with this project has been positive. The possibilities look encouraging and hopefully our success will boost confidence in Australia's biotechnology industry," Lipe concludes.

The AusIndustry website provides the information required to apply for the concession.

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