Industry Research and Development – Clinical Trial Determination

For biotech companies, the determination released by the Commonwealth on 20 January 2022, entitled “Industry Research and Development (clinical trials, Phase 0,I, II, III for an unapproved therapeutic good) Determination 2021” may provide further comfort regarding the eligibility of clinical trial activity for the R&D tax incentive. Broadly the determination clarifies that a clinical trials at Phase 0-III on an unapproved therapeutic good will qualify as a core activity.

There has been a number of biotech guidance documents released by Innovation Science Australia in the past, but as guidance documents are merely informative. The only specific legislative guidance on the eligibility of a clinical trial on the R&D tax incentive was in 2016 in the case of JLSP v Innovation Australia (2016) AATA 23. This case involved the conduct of a Phase III trial at a higher dose than had previously been used in humans and in a larger population group. The study constituted one site among 700 globally, involving 5,000 test subjects worldwide. The objective of the study was to measure the safety and efficacy of the test drug in humans. While the drug had been used in humans previously, it had not been used at the trial doses and did not take into account additional medical conditions of the subjects. The Administrative Appeals Tribunal (AAT) confirmed that the Australian trial constituted R&D activities that were experimental, and were conducted for the purpose of generating new knowledge.

We look forward to seeing the determination finalised. Prime has provided feedback on the draft and we would be happy to discuss our thoughts on it in more detail with clients. We also understand further determinations will follow for R&D activities in other industries, a welcome development.

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