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.