Biotechnology sector guide for the R&D Tax Incentive

This case study is designed to help you understand eligibility

requirements for the R&D Tax Incentive for activities that occur overseas.

Patients with coronary heart disease have narrowed arteries

caused by plaque build-up.

Coronary stent implants are used to expand these narrowed

arteries to improve blood flow and reduce the risk of blockage

and cardiac arrest.

However, its design still needed improvements.

Biofnatics, an Australian medical company sought to

improve quality of life for coronary heart disease sufferers

by developing a new, revolutionary coronary stent.

One that was biodegradable.

Biofnatics knew that current stents had serious limitations.

They weren't strong enough.

Caused high rates of inflammation and often caused

prolonged pain in patients.

Biofnatics developed a new type of stent made of biodegradable

polymer which could be fully absorbed by the patient's body

after its function was performed.

This would effectively reduce chest pain and increase life

expectancy of patients.

In order to develop and refine its idea Biofnatics needed to

manufacture a number of stent prototypes and assess their

performance with volunteer patients.

In other words it would take a clinical trial to perfect its new stent.

Biofnatics could undertake the clinical trials in Australia

but was unable to find the specialised facilities and

expertise it required to manufacture the new stents

in the local market.

Having previously accessed support for overseas activities,

Biofnatics was aware that for the overseas manufacturing work

to be eligible it first had to lodge an overseas finding

application with AusIndustry.

Once this was approved it would be ready to go.

The four key requirements Biofnatics needed to consider

before lodging its application for an overseas finding were

the manufacturing of the stents must be an R&D activity.

The R&D activity must have a significant scientific link to

an Australian core R&D activity.

The activity must not be able to be conducted in Australia and

the expenditure on the activity must be less than that incurred

on related Australian R&D activities.

Under the program eligible R&D activities can be either core

or supporting R&D activities.

Biofnatics had also self-assessed that the clinical

trials were in fact an Australian core R&D activity

because the work was experimental in search of an

outcome that could not be known or determined in advance that

could only be determined by applying a systematic process

and were being undertaken to generate new knowledge.

Biofnatics understood that the manufacturing of stents was

unlikely to qualify as a core R&D activity because the

manufacturing process was well known to the company and was not experimental.

However, because manufacturing the stents held a direct and

close relationship to the Australian based clinical

trials, the company self assessed that the activity was

potentially eligible as a supporting R&D activity.

Because the activity would produce goods in the form of the

prototype stents it also needed to pass the dominant purpose

test in order to be a supporting R&D activity.

This means that the reason for conducting the activity must be

to support a core R&D activity.

The company has confirmed its dominant purpose for

manufacturing the prototype stents was to use them in the

clinical trial core activity.

Biofnatics demonstrated in its overseas finding application

that its Australian-based clinical trials could not be

completed without manufacturing the stents first.

This established the necessary scientific link with the

Australian-based clinical trials.

Biofnatics now needed to consider whether the

manufacturing of the stents could be conducted in Australia.

On reviewing the four allowable reasons why an activity might be

done overseas it assessed that the required R&D activities

needed access to a facility, expertise or equipment not

available in Australia or its external territories.

In its overseas finding application Biofnatics also

included the total actual and reasonably anticipated

expenditure that would be incurred for the clinical trials.

The detail in Biofnatics' application allowed AusIndustry

to clearly see that the expenditure on the related

Australian R&D activities was anticipated to be greater than

the expenditure on the overseas manufacturing activities.

Biofnatics now had all of the information it required in order

to lodge its overseas finding application.

Record keeping is an important part of any R&D project and it

is an important part of good business practice.

Biofnatics kept records of the planning of the clinical trials

including the identification of potential clinics, surgeons and

the regulatory approval process.

A project plan that set out business aims and technical hypothesis.

The design of the experiments and ultimately how the results

of the experiments would be observed and analysed.

The details of its research and investigations into the

manufacturing of the stents and why this couldn't be undertaken in Australia.

Their assessment of the dominant purpose of

manufacturing the prototype stents.

Biofnatics also needed to keep records to establish that the

expenditure on the overseas activities was reasonably

estimated not to exceed expenditure on its related

Australian activities.

This included expenditure records for all work undertaken

overseas and in Australia and its estimates for anticipated work.

In this way Biofnatics was able to fulfil the eligibility

requirements for the R&D Tax Incentive and continue its

important work improving the lives of patients with coronary heart disease.

For more information visit business.gov.au or call 13 28 46.

[Music]

Alkolizer is a world leader in alcohol and  drug testing devices. We've been manufacturing  

in Australia for over 30 years and providing  devices for police to do roadside breath testing  

for nearly 20 years. We're owned by Gary Johnson,  he's the sole owner, he's had it and  

been part of this journey. The business  really started with the introduction  

of RBT laws. Gary actually owned a hotel, and was  concerned for some of his patrons and what  

the introduction of the RBT laws might mean. So  he went in search of a breathalyser, couldn't  

really find one, not one that was suitable, and  in the end in conjunction with some others on  

the East Coast started developing these out of  Brisbane. It's probably, certainly the largest  

business in Australia selling alcohol devices  and one of the larger ones around the world, so  

what Gary and the team decided to do probably  five to six years ago now was expand out of  

purely the alcohol space. Clearly alcohol is  an issue but so is drugs and it's becoming  

a bigger issue. So there was a real focus  in our business on drug testing technology.

The entrepreneurs program has been fantastic.  We're currently in the middle of a project  

and working on a growth roadmap. So the  R&D Tax Incentive from AusIndustry  

has helped support, for example, a different  calibration method which we're able to deploy  

into Brazil. So we've been the first company in  about 20 years to export alcohol products to  

Brazil. It's helped develop a wall-mounted  product. Historically that's what's driven  

the growth, the R&D to existing product  lines or or tweaking existing product lines.  

Going forward the Druglizer is launched, it's  two or so years out in the market and there is growth  

now starting to occur from that. Then the COVID  is next level again. When COVID evolved and  

some of the rapid antigen tests turned up, that  uses a lot of the manufacturing technology that  

we'd already been doing a lot of work on,  a lot of R&D on in our Druglizer space.  

For COVID you need to be a medical device  straight up, you can't be a screening device.  

So there's a different level of compliance and a  different level of competitive complexity [Music]

Hello, I’m Robyn Tolhurst, I’m public affairs manager for the Australian investment council

We’re the industry association that represents private capital within Australia and importantly

for innovation and the future growth of business within the domestic economy

The RnD tax incentive determination on clinical trials

Is a very positive step in the right direction towards providing

more certainty on the definition of core RnD activities

Within Australia we have a really well established eco system

for medical technology and bio technologies

And this first determination for clinical trials for the RnD program

Will be vitally important for providing clarity for businesses who are wishing to conduct

clinical trials for RnD

To help grow the particular medical eco system that we have within Australia

And also for future jobs and for future industries

RnD is available no matter where you live within Australia and so they’re easily able to search

business.gov.au for further information on how they might apply for the RnD tax incentive

And whether or not it’s relevant to their business in their current stages.