Draft R&D Tax Incentive Determination on clinical trials (Phase 0-III) for an unapproved therapeutic good.

Deloitte Tax Services Pty Ltd
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Phone: +61 2 9322 7000
www.deloitte.com.au

16 February 2022

Via consultation hub
Cc by Email: rdti.engagement@industry.gov.au

Dear Sir / Madam,

Draft RDTI determination on clinical trials: Deloitte feedback

Further to the publication of the Draft R&D Tax Incentive Determination on clinical trials (Phase 0-III) for
an unapproved therapeutic good, we are pleased to offer some comments in response to the consultation
questions raised.

Please see the attached Appendix for an outline of our comments and suggestions. We would be happy to
discuss or elaborate on these if of any interest or concern.

If you have any questions in relation to our comments, please call Misty Lambert on (03) 9671 8959 or me
on (07) 3308 7215.

Yours sincerely

Greg Pratt
Partner

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Appendix
1. Is the draft determination appropriate for providing more certainty of access to the R&D Tax
Incentive for clinical trials in Australia? How effective would the draft determination be if it
were finalised in its current state in providing certainty to your business? Why?

At the outset, we would note that the types of clinical trials covered by the draft determination are
amongst the activities carried out by our clients that already carry the highest levels of assurance
surrounding their RDTI eligibility.

Although we appreciate that it is these very circumstances which led to the adoption of this area as the
subject of the first determination, we feel that the final determination should be seen to be providing more
reassurance and assistance than a mere streamlined RDTI registration process for trials that are core
activities, given the levels of existing certainty. Opinions we have canvassed consider that the current draft
determination appears to provide a minimum level of further assistance.

We believe that there remain considerable uncertainties including the following key issues or areas:

- The absence of clarity surrounding the inclusion of medical devices and diagnostics (discussed further
below)
- The treatment of observational or non-interventional clinical trials

We would also note that clinical trials are more realistically viewed at a project level rather than the RDTI
activity level. Within this context, clarity would also be welcomed on the appropriate treatment of activities
requiring the manufacture of drugs for eligible trials and obtaining HREC / ethical / regulatory approvals.
For example, can these be encompassed as part of the core activity or do these still have to be registered
as supporting activities, which would significantly reduce the impact and effectiveness of the final
determination?

2. Should the draft determination be expanded? Specifically do you agree with the scope of the
draft determination including definitions? Do you consider it should include additional
clinical trials? Could it support you more with overseas and advance findings? How?

As noted in the comments above, we believe that the draft determination needs to be expanded to add
clarity to the treatment of non-interventional clinical trials and trials with the use of comparator drugs or
combination therapies.

We also believe that the blanket exclusion of trials involving generic products (or biosimilars) is unfair.
Although these are often developed utilising IP that is publicly available, their development can also involve
considerable complexity regarding manufacturing processes and experiments in humans to be able to
evidence that the drug product manufactured can reliably reproduce the product at a high quality and that
the drug is bioequivalent – which in some cases requires clinical trials/testing in humans.

Biosimilars in particular can be extremely hard to develop and require a very similar level of clinical trial
testing and the investment of significant amounts into manufacturing process development and clinical
trials.

If the determination cannot be expanded, as an alternative, we would welcome clarification that clinical
trials regarding biosimilars and generics which are not ‘core R&D activities’ according to the determination,
can still be registered where otherwise eligible, and are not automatically being classified as non-core R&D
activities?

A definition of therapeutic goods (or link thereto) should also be included for completeness, which should
specifically encompass medical devices and diagnostics, so it is made clear that appropriate trials covering
medical devices and diagnostics are included. The explanatory materials should also include discussion
surrounding the extent of the term therapeutic goods and whether any specific exclusions are envisaged.

In this context, we also suggest that the term ‘unapproved’ should also be defined more closely.

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We believe that the draft determination could assist in streamlining advance findings but only if the
determination deems it sufficient to merely include the relevant CTN number/HREC approval number (or
other similar mechanism) in the application for such advance findings, and not require a continued need to
describe the R&D activities.

In terms of advance overseas findings, the complexity of an overseas finding is not necessarily
demonstrating the eligibility of the Australian R&D activities, but rather the overseas R&D activities. As
such, this determination is unlikely to simplify the process, unless the overseas clinical trials also do not
need to be described, and the only additional information required is to explain the need to undertake the
clinical trials overseas and the significant scientific link they have to Australian core R&D activities.

We believe that this should be sufficient assuming that AusIndustry has confidence in relying on third-party
validation by the TGA to replace the role of the assessor.

Given the consistent and highly regulated nature of the drug development process, we also believe there
could be scope to include preclinical studies within the determination as core R&D activities and to also
include certain supporting activities – such as manufacturing or HREC approval.

This would provide clarity to the industry with respect to understanding the boundaries of the core and
supporting activities and avoid misinterpretation due to the difference in perception of the breadth of tasks
involved in a clinical trial and the definition of a core or supporting R&D activity.

3. Do you see the potential for the draft determination to be abused, undermining the integrity
of the R&D Tax Incentive? Do you consider people may try and apply to register activities
that are not core R&D activities? How?

We have not envisaged any particular areas of abuse but this question raised concerns with industry
participants that we spoke with in terms of the language used.

It is unclear what the reference to "register activities" means here and concern was expressed as to
whether there will be further requirements for the product to be registered, or other notification or
approvals beyond clinical trial approvals.

4. Do you consider the finalised determination should identify and require compliance with any
specific framework, guideline or standard, such as the Australian Guideline for Good Clinical
Practice? Why/why not? If yes, what should be specified?

We do not believe that further compliance requirements should be specified. The affected trials themselves
have many layers and levels of approvals and processes in and of themselves which ensure that the RDTI
provisions would be satisfied. For example, HREC approval will only be given if the outcomes are unknown
which aligns with the RDTI definition.

Such additional compliance requirements would be going beyond existing RDTI requirements and go
against the very objectives sought by the determination process.

5. Is there anything that confuses you about the draft determination? Please offer details.

As noted above, the draft determination and/or explanatory materials should be explicit that therapeutic
goods include medical devices and diagnostics, so it is made clear that appropriate trials that cover medical
devices and diagnostics are included. The explanatory materials should also include discussion surrounding
the extent of the term therapeutic goods and whether any exclusions are envisaged.

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6. Is it clear from the draft determination that it does not apply to the all phases of clinical
trials sector but it is limited to specific phase in clinical trials? Is it clear how phases 0, I, II
and III are core R&D activities? Why?

Subject to the comments made above, the distinctions between the intended phases of clinical trials in the
draft determination, and to which the draft determination applies are broadly clear. The draft
determination is not explicit regarding why they are core R&D activities in and of themselves, or why this is
important.

7. Is the explanatory statement helpful in understanding and applying the draft
determination? Is it clear what evidence you would maintain to apply to the R&D Tax
Incentive and that you are still required to maintain evidence of eligible expenditure? Is
there anything that confuses you about the explanatory statement? How could it be
improved?

No, the explanatory materials in their current state are not particularly helpful, for the reasons outlined
above. In addition, they provide no clarity around potential review activities that may be conducted by
AusIndustry. It would be helpful for the materials to be very specific around the evidence required to be
maintained from an activity perspective.

It is implicit that standard evidence would be required for eligible associated expenditures but again, this
could be made more explicit in the explanatory materials.

8. Would you know how to apply the draft determination when applying to the R&D Tax
Incentive Program? How? What is clear/unclear?

No. The practical application of the final determination is unclear in both our opinion, and those of our
clients with which we have had discussions. No real practical guidance has yet been provided about how
the final determination will actually streamline the RDTI application process. Will this determination remove
the need to describe the trials and only require inclusion of the CTN and /or HREC numbers, as is our
understanding?

It is our understanding that AusIndustry have limited appetite to include further specific items or boxes in
the RDTI registration form, but we hope that this could be included as a critical item.

The final explanatory materials should cover the details of what the practical administrative issues of
applying the determination will be. Alternatively, we recommend that the other public information
associated with the final determination will provide more clarity in respect of statements or disclosures
which need to be included in the relevant RDTI registrations to ensure that the determination will apply as
appropriate.

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