‘We sow, others harvest’: Top scientist warns tax reforms will undermine biotech sector

A globally recognised Australian scientist and innovator has issued a sharp warning to Treasurer Jim Chalmers, arguing that proposed changes to the Research and Development Tax Incentive (RDTI) and Capital Gains Tax (CGT) arrangements will inflict long-term damage on the nation’s ambition to remain a competitive global force in biotech and medtech innovation.

In a letter to the Treasurer, Emeritus Professor Paul Young, President of the Australian Society for Microbiology and President of the Asia Pacific Society for Medical Virology, warned that the combined impact of the two tax reforms would have a “substantial and lasting” impact on early-stage investment and the development of health technologies that can take decades to reach commercialisation.

Professor Young has spent his career at the intersection of biomedical research and translation, experiencing first-hand the time, cost and risk involved in transforming scientific discovery into safe and effective health technology.

That experience includes the creation of Vicebio, a company founded in 2018 by Professor Young and colleagues Professors Keith Chappell and Daniel Watterson. Built to develop UQ’s Molecular Clamp technology for vaccines against respiratory viral infections, the start-up was formed with capital support from European life sciences investment fund Medicxi.

Sanofi completed its acquisition of Vicebio in December 2025, in what became the largest deal involving a company commercialising intellectual property (IP) from an Australian university. The transaction included a total upfront payment of US$1.15 billion, with potential milestone payments of up to US$450 million based on development and regulatory achievements.

“I understand how acutely policy settings affect the willingness of investors and companies to commit to that journey in Australia,” said Professor Young.

The proposed ten-year age limit on the refundable R&D tax offset fails to recognise the reality of biotech development, where companies can remain pre-revenue for years while progressing through clinical trials, manufacturing scale-up and regulatory approval.

“In biotechnology and medtech, remaining pre-revenue at the ten-year mark is not a sign of commercial failure, it is often a sign that a company is doing exactly what it should be: conducting large-scale clinical trials, building manufacturing capability, and navigating the regulatory approval that developing safe and effective therapeutics demands,” explained Professor Young. “These are frequently the most capital-intensive phases of the entire cycle.”

Shifting support away from refundable offsets toward non-refundable credits could leave companies without taxable income unable to benefit, creating a dangerous incentive for later-stage development and commercialisation to move offshore.

“That is not a theoretical risk. It is a decision framework that companies and their investors are running right now,” he stressed.

The concerns also extend to proposed restrictions on eligible supporting R&D activities where clinical operations, trial-associated manufacturing, regulatory affairs, and data analysis are not administrative overheads, they are integral to conducting modern clinical research.

“You cannot run a Phase 3 trial or prepare for TGA approval without them. Any narrowing that fails to reflect this integration will exclude legitimate innovation work and create compliance uncertainty that deters investment,” Professor Young explained.

The proposed CGT changes will further amplify these pressures by reducing incentives for investors willing to provide capital to high-risk, long-horizon biotech ventures.

“Increasing the effective tax burden on gains from early-stage unlisted investments reduces that incentive at exactly the moment when Australia most needs to deepen its pool of committed innovation capital,” he said.

Early-stage biotech investment is fundamentally different from conventional investment activity and warned that policy changes that reduce its attractiveness relative to other asset classes or other jurisdictions will push capital toward other sectors or jurisdictions.

The combined impact of the proposed RDTI and CGT reforms could leave Australia trapped in a model where it funds discovery but fails to capture the economic and health benefits of commercialisation.

“Taken together, these proposals risk creating a policy environment where we sow and grow the seeds and watch others harvest the crop. The signal these combined reforms send is not one Australia should want to be sending,” Professor Young emphasised.

The government is being urged to engage with AusBiotech urgently, and to consider more targeted provisions that preserve support for legitimate, long-cycle health technology development.

“Australia has invested decades building a biotech and medtech sector of genuine international standing. These reforms should not inadvertently dismantle the policy settings that make it viable,” he stressed.

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