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Australian Treasury Consulting on Design of Patent Box Regime — Orbitax Tax News & Alerts

The Australian Treasury has launched a public consultation on the design of the patent box regime that was announced as part of the 2021 22 Budget. Responses to the consultation are due by 16 August 2021.

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Patent Box

Context and consultation objective

On 11 May 2021, the Australian Government announced that it will introduce a patent box for corporate income associated with patented inventions in the medical and biotechnology sectors. The patent box will apply to companies for income years commencing on or after 1 July 2022.

'Patent box' is a generic term for regimes that apply a concessional tax treatment to profits derived from eligible intellectual property (IP). Currently, over 20 jurisdictions, including the UK, Singapore and many European countries have patent boxes or other regimes that offer concessional tax treatments to IP derived profits.

The aim of the Government's policy is twofold:

  1. To encourage companies to base their medical and biotechnology research and development (R&D) operations, and commercialise innovation, in Australia. R&D investment is mobile and a range of factors influence companies' decisions. While it usually takes a number of years for innovations to become profitable in the medical and biotechnology sectors, a concessional tax rate on those profits will create an additional incentive to locate R&D in Australia.
  2. To retain the ownership of eligible patented inventions in Australia.

The objective of this discussion paper is to inform the Government's consideration of the detailed design of the patent box announced in the 2021-22 Budget.

This paper sets out the key design features of the patent box for which Treasury is seeking further information. Consultation questions are included as a guide only and submissions do not need to be confined to those questions.

Following consideration of responses to this discussion paper, the Government will issue and consult further on exposure draft legislation prior to introducing legislation into Parliament.

Through this discussion paper, the Government is also consulting on the potential expansion of the patent box approach to low emissions technologies and whether it is an effective way to support the development of those technologies.