Following the Federal Budget announcement in May 2021 (previously reported here), the Government has now introduced legislation to create Australia’s first Patent Box, and help Australian companies to commercialise medical and biotechnology innovation.
The Treasury Laws Amendment (Tax Concession for Australian Medical Innovations) Bill 2022 was introduced into the House of Representatives on 10 February 2022 and seeks to implement an optional 17% patent box regime targeting medical and biotechnology patents applying to income years commencing on or after 1 July 2022.
The patent box regime broadly provides concessional tax treatment for income derived by a corporate taxpayer from exploiting a medical or biotechnology patent. Eligible income will be subject to a lower effective income tax rate of 17 per cent, which is designed to encourage innovation and commercialisation of medical and biotechnology inventions in Australia.
Pleasingly, the patent box applies to patents granted or issued after 11 May 2021, which is significantly broader than the original proposal which was limited to patent applications filed after 11 May 2021.
Importantly, the scheme has also expanded the definition of “Qualifying patent”, allowing patents issued by the United States Patent and Trademark Office or granted under the European Patent Convention to access the regime. However, even where patents are filed in other jurisdictions, they must be owned in Australia and the underlying R&D must have occurred in Australia to benefit from the patent box.
Any patent under the scheme must link to a therapeutic good entered in the Australian Register of Therapeutic Goods to ensure the concessions are targeted towards relevant medical inventions. As a result, the regime remains limited to medical and biotechnology innovations, despite submissions from industry as part of the public consultation process in mid-2021 to expand the scheme to other industries such as clean technology.
Businesses wishing to keep informed of the progress of the Bill are encouraged to contact: