Patent Box - tax concession for Australian medical and biotechnology innovations
In the 2021–22 Budget, the previous government announced that it will introduce a patent box which would tax corporate income derived from eligible Australian patents in the medical and biotechnology sectors, at a concessional rate of 17 per cent, effective from 1 July 2022. This measure is not yet law.
The Patent Box regime will only apply to companies that have satisfied the eligibility requirements, have been granted an eligible patent and derive eligible income.
Australia currently taxes profits generated by patents at the headline corporate rate (30 per cent for large businesses and 25 per cent for small to medium enterprises from 1 July 2021). The patent box will apply to income derived from Australian medical and biotechnology patents and will attract a competitive tax rate of 17 per cent.
The government will consult with industry on the design of the Patent Box, as well as whether a patent box would be an effective way of supporting other industries.
The aim of the government's new measure is to encourage additional investment and performance of research and development activity and encourage companies to develop and apply their innovations in Australia.
This measure builds on the 2020–21 Budget measures titled JobMaker Plan – Research and Development Tax Incentive – supporting Australia’s economic recovery and JobMaker Plan – Modern Manufacturing Strategy.
Legislation and supporting material
Treasury Laws Amendment (Tax Concession for Australian Medical Innovations) Bill 2022External Link was introduced to Parliament on 10 February 2022 but not enacted. It has now lapsed and will be subject to consideration by the government.
More information
The government announced that it will introduce a patent box which would tax corporate income derived from eligible Australian patents in the medical and biotechnology sectors, at a concessional rate of 17 per cent, effective from 1 July 2022.