Memphasys Limited has disclosed a $1.118 million liability linked to its FY24 R&D tax rebate following an ASX inquiry, while confirming compliance with continuous disclosure rules and ongoing engagement with the ATO for a private ruling.
- Recognition of $1.118 million liability for FY24 R&D tax rebate
- Discovery linked to 'connected entity' status of major shareholder
- Specialist tax advice obtained and private ATO ruling sought
- Adjustment is non-cash, no immediate impact on cash flow
- Company confirms compliance with ASX Listing Rules and disclosure obligations
Background to the Adjustment
Memphasys Limited, a biotechnology company listed on the ASX, has responded to an ASX Aware Letter concerning a material adjustment in its FY25 financial statements. The adjustment relates to a $1.118 million liability recognized against the FY24 Research & Development (R&D) tax rebate. This liability emerged after the company identified that a substantial shareholder, Peters Investments Pty Ltd, holding convertible notes, may be considered a "connected entity" under the relevant R&D tax legislation.
Discovery and Response Timeline
The issue was first identified during the audit process on 13 August 2025. Given the complexity and novelty of the tax legislation interpretation, Memphasys sought specialist tax legal advice, which was only received on 26 September 2025. Following this, the company and its auditors assessed the advice and finalized the recognition of the liability in the FY25 financial statements, released on 30 September 2025.
Disclosure and Compliance
Memphasys confirmed that it did not disclose the information earlier because the matter was subject to legal and accounting uncertainties, falling within the carve-out provisions of ASX Listing Rule 3.1A. Once the position was clarified, the company promptly released the information, affirming its compliance with continuous disclosure obligations under Listing Rule 3.1. The company also acknowledged a minor inadvertent omission of the word "audit" in its announcement and annual report, which has since been clarified.
Financial and Cash Flow Implications
The adjustment is of a non-cash nature and does not affect the company’s cash flow from operations for FY25. However, Memphasys is actively seeking a private tax ruling from the Australian Taxation Office (ATO) to confirm its position on the FY24 R&D tax rebate. Should the ruling be adverse, it could result in a cash outflow representing repayment of the rebate. The company maintains that all claims were made in good faith and in accordance with program guidelines.
Looking Ahead
This development highlights the complexities biotech companies face in navigating R&D tax incentives, especially when shareholder structures intersect with tax legislation definitions. Investors will be watching closely for the outcome of the ATO ruling, which will clarify the ultimate financial impact and potentially set a precedent for similar cases in the sector.
Bottom Line?
Memphasys’ next steps hinge on the ATO ruling, which could reshape its financial outlook and investor confidence.
Questions in the middle?
- What will be the outcome and timing of the ATO’s private tax ruling?
- Could the connected entity status affect future R&D tax claims or shareholder arrangements?
- How might this ruling influence investor sentiment and Memphasys’ share price volatility?