What is the Patent Box?
Patent Box will offer tax breaks for medical and biotech innovations in an effort to boost commercialisation and retain IP in Australia.
Funding
The federal government has pledged $206.4 million for the patent box tax incentive scheme. Income derived from Australian medical and biotech patents that are Australian-owned and have been developed locally will be taxed at 17%. That’s considerably lower than the standard 30% corporate income tax rate.
It is intended to complement the Research & Development Tax Incentive, which saw a $2 billion boost in last year’s budget.
It is appropriate to study the adoption of a patent box regime in Australia. According to the OECD, Australia is one of the lowest spenders on direct R&D funding for business: ranking 34th out of 36 among OECD and BRICS nations. Adding indirect support (through the R&D tax incentive) Australia’s rank rises to 18th.
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Eligibility
The exact details are yet to be decided but here is a guide. Your company is elgiible:
- is liable to Corporation Tax
- makes a profit from exploiting patented inventions
- owns or has exclusively licenced-in the patents
- has undertaken qualifying development on the patents
Patent holders may wish to licence their inventions for others to develop.
If your company holds licences to use others’ patented technology it may use the Patent Box if it meets all the following conditions. The licensee must have:
- rights to develop, exploit and defend rights in the patented invention
- one or more rights to the exclusion of all other persons (including the licensor)
- exclusivity throughout an entire national territory (rights to manufacture or sell in part of a country would not qualify)
The licencee must meet one of these conditions:
- be able to bring infringement proceedings to defend its rights
- be entitled to the majority of damages awarded in successful proceedings relating to its rights
Timing
The scheme is set to come into effect from 1 July 2022, and the concession will be available for patents that are applied for after the budget announcement at 7.30pm on Tuesday, May 11.
News
07 April 2022 – Patent Box now expands to include agricultural innovations
The Government recently announced an expansion to Australia’s new patent box scheme in the 2022-23 Budget. This expansion to the patent box scheme extends support for practical, technology-focused innovations in the Australian agricultural and veterinary sectors and for technologies which have the potential to lower emissions in line with the Government’s target to achieve net zero emissions by 2050.
The patent box will reduce the income tax rate to 17 per cent for PBRs and patents granted or issued after 29 March 2022 and for income years starting on or after 1 July 2023. The tax concession only applies to income, where the research and development of the innovation took place in Australia.
03 March 2022 – Australia’s Patent Box One Step Closer
Eligibility proposed for Australia’s patent box regime for Australian medical and biotechnology industries is now clear, following the introduction of the Treasury Laws Amendment (Tax Concession for Australian Medical Innovations) Bill 2022 to amend taxation legislation to Parliament.
Australia’s patent box regime was first announced in the 2021-2022 Federal Budget. Income derived from eligible patents was proposed to be taxed at a 17% rate, rather than the standard corporate tax rate of 30%, or 25% for small and medium enterprises (SMEs).
The Explanatory Memorandum to the Bill notes that the Government’s key objectives of the patent box regime are to encourage companies to base their medical and biotechnology research and development (R&D) operations in Australia and to commercialise these patented inventions in Australia.
12 May 2021 – CSL welcomes Patent Box Policy
CSL welcomes the Federal Government’s Budget commitment to introduce a Patent Box. A Patent Box will encourage onshore commercialisation and manufacture of Australian medical research. It will support local manufacturing of innovative medical products and counter the off-shoring of Australian intellectual property.
Australia’s policy environment for investment into commercialisation of medical research needs this reform in order to compete with countries such as the UK, Switzerland, France, Ireland, Singapore and other peer nations, which offer targeted incentives designed to encourage the commercialisation of home-grown IP.
