The Federal Government announced in the 2021-2022 budget that it will be introducing a patent box scheme aimed at encouraging innovation in Australia. From 1 July 2022, patents in the medical and biotechnology field will be eligible to fall within a patent box that will tax income derived from the patent at a concessional corporate tax rate of 17%.
Australia currently taxes profits generated by patents at the headline corporate rate of 30% for large businesses and 25% for small to medium enterprises (from 1 July 2021). The patent box will offer a competitive tax rate for profits generated from Australian owned and developed patents. However it will only be available to patents that have been granted this status by the Government.
The patents are required to be domestically developed, with the aim of encouraging additional investment in research and development as well as keeping these activities and the patents, in Australia.
The Government plans to consult with industry about the detailed design of the patent box and also plans to consult on whether the patent box would be an effective way of supporting the clean energy sector.