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Federal Budget 2022-23 | March: Patent box measures

Federal Budget 2022-23 | March: Patent box measures

The Government has announced that it will be expanding the patent box measures announced in last year’s Budget to additional sectors to drive more investment and encourage Australian companies to commercialise their innovations in Australia.

Expanding the patent box tax concession to Australian agricultural and low emission technology sectors

The Government has announced that it will be expanding the patent box measures to support additional sectors, including the Australian agricultural sector and low emission technology sector.

From 1 July 2023, it is proposed that eligible corporate income will be subject to an effective income tax rate of 17 percent for patents granted or issued after 29 March 2022. Eligible income will be concessionally taxed to the extent that the research and development (“R&D”) activities relating to the innovation took place in Australia.

The Government will consult with industry prior to finalising the detailed design of the patent box expansion to the additional sectors.

It is anticipated that the patent box measures will offer a competitive tax rate for profits generated from eligible Australian owned and developed patents, which will ultimately support the commercialisation of innovation and encourage further R&D activities in Australia.

Updated policy specifications for Australian medical and biotechnology innovations

In last year’s Budget, the Government announced that it would look to introduce patent box measures where income earned from new medical and biotechnology patents developed in Australia would be taxed at a concessional rate of 17 per cent. These measures are currently before Parliament and are expected to apply to companies for income years commencing on or after 1 July 2022.

In this year’s Budget, the Government has announced that it would be expanding the policy specifications relating to the Australian medical and biotechnology sector, by enabling patents granted or issued after 11 May 2021 to be eligible for the regime. Further, the Government has removed certain regulatory barriers around the registration of Australian developed innovations patented overseas.

Whilst the patent box measures have been expanded for the medical and biotechnology sector, it remains that taxpayers can only benefit from this regime to the extent that the R&D activities relating to the development of the patent occurred in Australia.

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