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What's in the Box: Federal Budget incentives to stimulate innovation in Australia

Melanie Serafini

In the 2022-23 Federal Budget, the Australian Government announced that it will extend the “Patent Box” system to include the agricultural sector and low emissions technology innovation if it wins government (link here).  In addition, the system would be extended to include granted patents obtained in the United States or Europe as well as Plant Breeder’s Rights (PBR).

The Australian Government hopes the introduction of the Patent Box, which is in addition to the existing R&D Tax Incentive, will stimulate research and development and the commercialisation of intellectual property in Australia. 

What is a “Patent Box”?

A Patent Box is a low corporate tax regime which incentivises research and development by offering concessional tax treatment on profits derived from commercialising eligible intellectual property.  While Patent Boxes have been used in a number of overseas countries, such as the United Kingdom and Singapore, the system is new to Australia.

The Australian Government has now introduced legislation for a Patent Box regime into Parliament.  The Bill proposes to amend the Income Tax Assessment Act 1997 to provide concessional tax treatment for eligible income associated with patents in key technology areas identified by the Australian Government.

What will this mean for me?

Providing the eligibility criteria are met and subject to legislation, any income derived from the exploitation of an eligible patent would be taxed at an effective income tax rate of 17% (down from 25% for SMEs and 30% for large businesses).[1]

To be eligible to claim the tax concession, you must be

  • an R&D entity for the purposes of the R&D Tax Incentive (link here); and
  • the legal owner of an eligible patent or PBR.

In addition, the research and development underlying the patent or PBR must have been done in Australia and the invention must have been exploited by the owner in Australia.

Eligible patents or PBRs must have been granted by the Australian Intellectual Property Office, the United States Patent & Trademarks Office, or the European Patent Office.  Eligible patents or PBRs include:

  • A medical or biotechnology patent linked to a therapeutic good that is included in the Australian Register of Therapeutic Goods; or
  • A patent linked to an agricultural and veterinary (agvet) chemical product listed on either the Australian Pesticides and Veterinary Medicines Authority (APVMA) or PubCRIS (Public Chemical Registration Information System) register; or
  • A patent related to low emissions technology as set out in the 140 technology areas listed in the Australian Government’s 2020 Technology and Investment Roadmap Discussion Paper, or included as priority technologies in the Government’s 2021 and future annual Low Emissions Technology Statements; or
  • A PBR registered after 29 March 2022.

[1] Subject to legislation, the tax concession applicable to the exploitation of a medical or biotechnology patent will apply to income earned after 1 July 2022, where the patent was granted or issued after 11 May 2021.  In respect of an agricultural patent, a low emissions technology patent or a Plant Breeder’s Right, the tax concession would apply to income earned after 1 July 2023, where the patent was granted or issued after 29 March 2022

Should I rush out and file a patent application?

If you have not yet filed a patent application for your invention, you definitely should consider doing so! A patent ensures your idea stays yours, and you can protect it should it be copied or challenged. 

However, there is no rush to file the patent application on the basis of legislation that may or may not be enacted. 

Instead, it is more important to ensure that you protect your intellectual property rights before you publicly disclose or commercialise your invention.

Need a Patent Registered? Contact Kings IP today!

We are experts in the local and international patent application requirements and processes. If you have intellectual property that needs protecting, speak to us today at Kings IP to ensure you are covered.

[1] Subject to legislation, the tax concession applicable to the exploitation of a medical or biotechnology patent will apply to income earned after 1 July 2022, where the patent was granted or issued after 11 May 2021.  In respect of an agricultural patent, a low emissions technology patent or a Plant Breeder’s Right, the tax concession would apply to income earned after 1 July 2023, where the patent was granted or issued after 29 March 2022

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