The future looks grim for Australia’s patent box tax regime.
The previous Liberal government announced a patent box regime for Australia in the May 2021 budget, to provide concessional tax treatment for income derived from exploiting a medical or biotechnology patent (and subsequently agricultural and low emissions patents). Following industry consultation, The Treasury Laws Amendment (Tax Concession for Australian Medical Innovations) Bill 2022 was introduced into the House of Representatives in February 2022 seeking to implement the scheme from 1 July 2022.
However, the Bill lapsed when parliament was prorogued in the lead up to the 2022 Federal election and has not yet been reintroduced. In our view, it is now unlikely to proceed given the current Labor Government appears to be taking a harder line on the tax position when it comes to IP.
Relevantly, in its October 2022 budget the Government proposed to introduce an anti-avoidance rule to deny deductions for payments relating to intangibles in low or no tax jurisdictions (including jurisdictions with a tax preferential patent box regime without significant economic substance).
While there has been no official announcement, it would appear this measure has been put back in the box for now.