Medical technology sector raises fresh concerns with Labor’s capital gains tax overhaul
Nine Australian medical technology industry groups warned that Labor’s capital gains tax and R&D tax incentive changes will stifle local health startups, which often take over a decade to reach profitability. The proposed 10-year limit on refundable R&D tax offsets and a shift from a flat 50% CGT discount to an inflation-linked model threaten the sector’s viability, according to a joint letter to Treasurer Jim Chalmers.
Australia’s medical technology sector is raising concerns over Labor’s proposed tax reforms, which industry groups say will hinder innovation and commercialization in a sector where companies typically require over a decade to develop profitable products. Nine peak health and medical technology organizations, including Bio NSW, Life Sciences Queensland, and AusBiotech, signed a joint letter to Treasurer Jim Chalmers this week. They argue that the government’s planned changes—including a 10-year cap on refundable R&D tax incentives and adjustments to capital gains tax discounts—pose a ‘triple threat’ to domestic startups. The letter highlights that the 2026–27 federal budget expanded the turnover threshold for refundable R&D tax offsets to $50 million but restricted refundability to companies under 10 years old. Previously, firms with turnover under $20 million could receive cash refunds even while loss-making, a critical lifeline for early-stage health tech firms. Under the new rules, companies older than 10 years can still access the R&D incentive, but it becomes non-refundable, forcing them to defer benefits until profitable. The groups emphasized that medical technology development often spans well beyond a decade, encompassing phases like discovery, pre-clinical trials, and evidence generation. Labor’s capital gains tax overhaul—shifting from a flat 50% discount to an inflation-adjusted model—further compounds the challenges, particularly for long-cycle industries. The letter urges Chalmers to adjust the policies to ensure they remain supportive of Australia’s health tech sector. Meanwhile, Labor’s broader tax legislation, including changes to capital gains tax and negative gearing, passed the House of Representatives on Thursday. The bill now faces a two-day Senate inquiry, with Labor aiming to secure passage by late June. Opposition parties, including the Greens and Coalition, have not ruled out extending the inquiry, potentially linking it to reviews of the National Disability Insurance Scheme (NDIS). Despite this uncertainty, Labor officials remain confident the tax reforms will proceed as planned.
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