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Volume XI, Number 175


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Introduction of a Patent Box

As announced in the Federal Budget 2021-22, the Government will encourage innovation in Australian medical and biotech technologies by introducing a "patent box" system.  

From 1 July 2022, the patent box will tax income derived from Australian medical and biotech patents at a 17% effective concessional corporate tax rate (as opposed to the current corporate tax rate of 30% for large businesses and 25% for small to medium companies). Income from manufacturing, branding and other attributes may be excluded from this concession and continue to be taxed at existing corporate tax rates.

Only granted patents, which were applied for after 7.30pm on Tuesday 11 May 2021, will be eligible. 

By offering a competitive tax rate for profits generated from Australian owned and developed patents, the patent box's purpose is to boost additional investment and hiring in research and development activities and encourage companies to develop and apply their innovations in Australia. 

Over twenty countries currently have patent boxes (or a similar regime), including the UK, the Netherlands and France – all designed to encourage the development and ownership of certain intellectual property in their home jurisdiction. The Federal Government will follow the OECD’s guidelines on patent boxes to ensure the patent box meets internationally accepted standards. 

At this stage, the patent box will initially be limited in scope, but the Federal Government will consult closely with industry on the design of the patent box and to determine whether its scope should be extended to assist the clean energy sector. 

The proposed introduction of the patent box system is one of several tax reform initiatives contained in the Budget, all of which are focused on job creation, investment and growth.

Copyright 2021 K & L GatesNational Law Review, Volume XI, Number 134



About this Author

Betsy-Ann Howe, KL Gates, Australia, outbound investment attorney, asset financing lawyer

Ms. Howe is a corporate and transactional tax partner with deep experience in taxation issues associated with mergers and acquisitions, inbound and outbound investment, asset financing (with a particular emphasis on aircraft leasing) corporate and international tax. With over 25 years' experience in taxation law, Ms. Howe's experience includes advising on structured finance transactions, cross border leasing, and domestic and international tax issues.

Ms. Howe's practice focusses on all areas of corporate finance tax, managed investment trusts,...

Rebecca Bolton, Special Counsel, Tax Planning, Attorney, KL Gates, Law firm
Special Counsel

Ms. Bolton acts for a broad range of clients providing both direct and indirect taxation advice. Her experience in tax planning and advisory work includes corporate reconstructions, acquisitions and takeovers and general structuring advice, as well as advising non-resident investors on Australian acquisitions. Ms. Bolton also has significant experience in the area of tax controversy and litigation.

Ms. Bolton regularly deals with the Australian Taxation Office (ATO) and state revenue bodies in respect of audits and rulings and advises clients on...

Naeha Lal Tax Attorney K&L Gates Sydney, Australia

Naeha Lal is a tax lawyer who advises on a broad range of taxation issues, including those associated with mergers and acquisitions, inbound and outbound investments, corporate structuring and reorganisations, and employee incentive programs. She is also experienced in advising not-for-profit organisations, and assisting clients with tax audits and reviews.

Naeha has acted on behalf of clients in relation to disputes with the Australian Taxation Office and matters before the Administrative Appeals Tribunal. 

Having completed a 12 month secondment to K&L Gates' London...

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