Why R&D Tax Incentive and CGT Changes Could Cost the NSW Life Sciences Sector its Innovation Edge

A packed room at EY's Sydney office on July 7th 2026 put one point beyond doubt: the Life Sciences sector is not divided on the proposed RDTI and CGT changes, rather, it is aligned, and it is not staying quiet.BioNSW partnered with EY to host a Federal Budget Briefing on the proposed changes to the Research and Development Tax Incentive (RDTI) and Capital Gains Tax (CGT) settings. The turnout reflected how directly these settings touch the sector's ability to fund discovery, development and commercialisation in NSW.

The Setting: A Tighter Fiscal Environment

EY's senior economist opened with the macro picture: persistent government debt, high cash rates and global instability, all adding pressure on a government looking for savings. Innovation-driven sectors like life sciences are an easy target in that search, even though they are the sectors least able to absorb a shortened funding runway.

Why a 10-Year Cap Doesn't Fit the Life Sciences Sector

The panel's core argument was straightforward: human health R&D timelines don't compress to fit a policy window.

Regulatory approval pathways for therapeutics and medical devices are long by design, because the products have to be proven safe before they reach patients. That process routinely runs longer than the proposed 10-year RDTI cap allows. Layer in multi-product pipelines and the cost of retaining specialist talent, and the proposed CGT changes compound the problem rather than solve it.

The panel's point wasn't that life sciences wants special treatment for its own sake. It's that a 10-year window designed around generic commercialisation timeframes doesn't reflect how long it actually takes to get a regulated health product to market, and treating it as if it does risks pushing projects to launch before they're ready or starving them of funding partway through.

What EY Recommended Life Sciences Founders Do Now

The clearest message from EY's team was one of measured restraint: don't overreact. Offshoring, relocating the business, or making structural changes in response to a proposal that hasn't been legislated yet is premature and potentially costly to unwind.

The more useful work founders can do now is defensive and administrative: get your paperwork in order. Incentive eligibility, whether for RDTI, the Small Business concessions or IBCC-related programs, depends on documentation that has to hold up to scrutiny. That means having services agreements, R&D activity records and core business documentation current, complete and readily accessible, so that if and when the rules change, the business isn't scrambling to reconstruct a paper trail under time pressure.

EY also pointed to more specific preparatory steps, including reviewing business structures against the proposed CGT Discount, Trust Taxation and Negative Gearing changes, and modelling R&D claims under a "core-only" scenario.

Aligned on the Problem, Not Entirely on the Framing

Panelists agreed the proposed changes create real risk. They didn't entirely agree on why.

Matthew Baker from Blue Ocean Equities argued life sciences isn't fundamentally different from other capital-intensive, long-horizon industries, and that the sector's case rests less on being special and more on the actual numbers: R&D timelines, capital costs and commercialisation runway simply don't fit a 10-year window, regardless of the product.

As BioNSW Board Member Kathy Connell put it, countering that view directly:

"The life science industry is special because it has such a profound impact on people's lives. We are making medicines to save and improve people's lives."

Her view, echoed by others in the room, is that the sector's appropriately heavy regulatory environment, the high human stakes of its products, and the consequently long development timelines justify it being treated differently from other industries when it comes to the proposed tax changes, including the shortened window for the R&D Tax Incentive and CGT settings.

What Happens Next

BioNSW has already co-signed a joint letter to Treasurer Jim Chalmers, alongside 16 other peak National Life Sciences Sector bodies, opposing the proposed RDTI and CGT changes.

BioNSW has also made its own submission to the Federal Treasury Innovative Business CGT Consultation (more to follow on that).