Last month’s federal budget risks doing real damage to Australia’s ability to commercialise medical research, even as it gets part of the equation right. The increased distribution from the Medical Research Future Fund, from $650 million to $1 billion, is welcome. But research funding alone is not enough.
If Australia wants a national return on its medical research investment, the capital settings need to allow discoveries to become companies, companies to fund clinical development, and successful products to reach patients and global markets.
This is where the 2026-27 budget falls short.
Commercialisation in life sciences is not simple, quick or cheap. It is a high-risk, high-reward, long-duration process that depends on patient risk capital.
Reform of tax incentives for largely passive investment in established property is reasonable in the middle of a housing crisis. But investing in life sciences is fundamentally different.
These investors are not clipping a coupon. They are taking a serious risk of failure. Many companies will not succeed. A small number will, and very substantially.
That is why capital gains in this context are not the same as income from secure employment or passive asset appreciation.
To this point, the government will point to expanded early-stage venture capital incentives and changes to the R&D Tax Incentive.
But the venture capital threshold changes were overdue, and the proposed 10-year limit on access to the refundable R&D Tax Incentive does not align with the pre-revenue life sciences commercialisation pathway
Furthermore, one point that I haven’t seen discussed widely is the potential effect of the proposed CGT changes on investment in high-growth shares.
For many Australian life sciences companies, listing on the ASX has been a pathway to raise the capital needed for expensive clinical trials and commercialisation activities.
The proposed CGT changes on shares are likely to shift capital towards mature, dividend-paying companies and away from high-growth, high-risk companies where the reward for taking on risk is significantly reduced.
That is a dangerous incentive for a country facing a productivity challenge and increasing pressure to build sovereign capability, technological resilience and economic complexity.
This is precisely the moment when Australia should be encouraging productive risk-taking and long-term investment in emerging industries.
If the ASX and Australia’s early-stage biotech environment become unviable pathways, the already strong pull of NASDAQ and the US will become the default destination for our medical discoveries, sooner rather than later.
And with that goes Australia’s return on decades of medical research investment.
Australia cannot keep relying on a lucky country mentality. We can get this wrong. We can create an environment that pushes ambitious technology companies offshore precisely at the moment of rapid technological and geopolitical change.
Risk capital, both human and financial, is the fuel for an ambitious and resilient economy. And it is mobile.
Dr Megan O’Connor is a passionate advocate for the Australian biotech industry and founded Kantara Consulting, a life science-focused consultancy offering corporate affairs and non-dilutive funding services. Prior to starting Kantara, Dr O’Connor was the National Leader for Life Sciences at Deloitte’s Global Investment and Innovation Incentives Team.
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