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Australian Treasury Opens Consultation on Patent Box Design System

Consultation closes 16 August 2021



In the 2021 Australian Federal Budget, the Treasurer, Josh Frydenberg, announced that the Treasury will introduce a patent box for eligible corporate income associated with new patents in the medical and biotechnology sectors.


The patent box will apply to companies for income years commencing on or after 1 July 2022.


Consultation on the design of the patent box system has now been opened and will close 16 August 2021.


Background

‘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 Australian 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.

Discussion Paper

Treasury has now released a Discussion Paper on the design of the patent box system. The objective of the Discussion Paper is to inform the Government’s consideration of the detailed design of the patent box. The Discussion Paper can be downloaded here.


The Discussion Paper provides the following areas for feedback:

- Eligible IP to enter the patent box

- Targeting medical and biotechnology

- Low emissions technologies

- Applying the substantial activity requirement

- Definition of R&D

- Implementation and start date

- Eligible revenue to enter the patent box

- Subtraction of related patent expenses from eligible revenue

- Treatment of losses and related offsets with the patent box


Responding

Interested parties are invited to comment on this consultation. Responses to this consultation can be received up until 16 August 2021.


While submissions may be lodged electronically or by post, electronic lodgment is preferred.

All information (including name and address details) contained in submissions will be made available to the public on the Treasury website unless you indicate that you would like all or part of your submission to remain in confidence. Legal requirements, such as those imposed by the Freedom of Information Act 1982, may affect the confidentiality of your submission.

Please see the Treasury’s submission guidelines found here for further information.


How To Respond

Email patentboxconsultation@treasury.gov.au


Post Address written submissions to:

Paul Fischer Corporate and International Tax Division The Treasury Langton Crescent PARKES ACT 2600


Further Enquiries to Treasury


Email patentboxconsultation@treasury.gov.au


Phone Paul Fischer & Simon Winckler +61 2 6263 2832


General Enquiries about the Patent Box


Email Gary Cox, Chairman Wrays

gary.cox@wrays.com.au

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