In a welcome boost for Australian innovators in biotech and medical technologies, the Australian government has announced the introduction of a new patent box scheme which will come into effect on 1 July 2022.
Patent box schemes of different forms are currently available to innovators in over twenty countries including many European countries. The general concept of a patent box scheme is to encourage innovation by applying a lower rate of corporate tax to any profits made from patented inventions.
The Australian government is introducing a patent box to encourage businesses to undertake R&D and keep patents in Australia. The patent box will tax income derived from Australian medical and biotech patents at a 17 per cent effective concessional corporate tax rate. Normally corporate income is taxed at 30 per cent or 25 per cent for SMEs.
Only granted Australian patents with a filing date after 11 May 2021 will be eligible for the patent box. It seems likely that the patent box will also only apply to granted Australian standard patents and not innovation patents.
The government has said it will consult closely with industry on the design of the patent box before implementation on 1 July 2022.
In addition to the new patent box scheme which incentivises businesses at the ‘back end’ of the commercialisation pathway, Australia also has an R&D tax incentive, which provides incentives to carry out earlier stage research and development in Australia.
At this stage, the patent box scheme will only apply to biotech and medical technologies, although the government has also suggested it could be extended to the clean technology sector. In an effort to incentivise innovation in a wide range of sectors in Australia it would be good to see the patent box scheme eventually extended to other technology areas as well.
Madderns will monitor the implementation of the patent box scheme closely and update our clients and associates when we have further information.