The Government recently announced an expansion to Australia’s new patent box scheme in the 2022–23 Budget. We previously reported on the announcement of the patent box scheme and on the later release of details of the scheme.
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.
To be eligible, the corporate taxpayer must commercialise a plant variety protected by Plant Breeder’s Rights (PBRs) or an eligible patent for an agricultural and veterinary (agvet) chemical product listed on the Australian Pesticides and Veterinary Medicines Authority (APVMA) or PubCRIS (Public Chemicals Registration Information System) register. Alternatively, the corporate taxpayer must commercialise a patented technology which has the potential to lower emissions.
Currently, profits on PBRs, patents on agvet products and patents on emissions reducing technology are taxed at the corporate rate of 30 per cent for large businesses and 25 per cent for small enterprises. 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 eligible income, where the research and development of the innovation took place in Australia.
Taken together with the R&D Tax Incentive, which provides up to a 43.5% refundable tax offset for eligible research and development activities, this expansion to the patent box will provide an increased incentive to conduct research and development in Australia.
This patent box expansion to agriculture and emissions reducing technology will be introduced into the patent box legislation after the Government has consulted with industry and settled the details of the expansion.
It is estimated that this expansion will deliver $13.4 million to eligible corporate taxpayers with PBR and agvet patents over the 2022 to 2026 period, and will deliver $66.2 million to eligible corporate taxpayers with emissions reducing patents over the same period.