Draft R&D Tax Incentive determination on clinical trials for unapproved therapeutic goods

On 20 January 2022, the Government released the draft Industry Research and Development (clinical trials, Phase 0, I, II, III for an unapproved therapeutic good) Determination 2021 for public consultation.

This Draft Determination presents as good news for R&D Tax Incentive claimants that engage in clinical trials and will work to reduce the regulatory burden for claimants by providing clarity in respects to the types of clinical trials that Industry, Innovation and Science Australia (the Board) deems to be eligible core R&D activities. The Board has proposed that the Draft Determination will lessen the burden of registration for claimants, with organisations conducting clinical trials sometimes applying for advance findings to provide certainty as to the eligibility of their activities. It is hoped that the Draft Determination will provide comfort to these claimants such that they will not need to apply for advance findings, thereby streamlining the registration process for some companies.

The public are invited to make written submissions during the consultation period. Respondents can address the optional questions listed in the Consultation Paper to guide their written submissions.

Submissions for the consultation close on 17 February 2022. BDO will be making a submission and invites the feedback of its clients in respect to this.

Proposed eligible activities

The draft determination applies to phase 0, I, II and III clinical trials for unapproved therapeutic goods, which includes:

  • Therapeutic goods which are used solely for experimental purposes in humans that are approved by or notified to the Therapeutic Goods Administration (TGA)
  • Medical devices which are used solely for experimental purposes in humans that are notified to the TGA
  • Biologicals (derived from human cells) that are used solely for experimental purposes in humans which are approved by the TGA.

The draft determination defines ‘unapproved therapeutic goods’ to mean therapeutic goods yet to be entered onto the Australian Register of Therapeutic Goods.

Activities Not Covered

The draft determination does not apply to any of the following:

  • Generic products: any clinical trials, including phase 0, I, II and III clinical trials, of generic products
  • Phase IV clinical trials: defined as clinical trials undertaken in Australia after the previously unapproved therapeutic good has been approved for the treatment of a particular disease
  • Excluded core R&D activities (as defined under section 355-25(2)): generally, these core activity exclusions are not associated with clinical trials, however core activity exclusions covers activities associated with complying with statutory requirements or standards in addition to the legal and administrative aspects of patenting. It remains to be seen how the draft determination will interact with the statutory requirements exclusion, noting that whilst these activities are excluded from being core activities they can still be eligible as supporting activities where they are undertaken for the dominant purpose of supporting eligible core R&D activities.
  • Activities that are not or will not be conducted in accordance with all applicable approvals.

It is worth noting that while the draft determination does not extend to phase IV clinical trials or clinical trials of generic medicines, an acceptance of the draft explanatory memorandum has been issued such that clinical trials are still capable of meeting the definition of a core activity under the Income Tax Assessment Act 1997.

BDO’s Comment

BDO welcomes the reduced regulatory burden that the draft determination will provide claimants engaging in phase 0-III clinical trials. This will ensure a less burdensome experience when applying for the R&D Tax Incentive and will provide additional comfort to those engaging in clinical trials, as they are typically expensive activities to undertake.

Access full suite of consultation documents (including the draft explanatory memorandum and draft determination).

If you would like to discuss the impact of this draft determination, or provide feedback for inclusion in BDO’s written submission, please contact our R&D team or submit an enquiry