AusBiotech calls for feedback on its six key recommendations in response to the Treasury discussion paper on the Australian patent box policy design.
While Treasury's consultation paper is limited in scope, important questions have been asked to help frame and target future discussion and legislation appropriately. AusBiotech has developed six key recommendations in response to these.
A well designed, accessible, and effective Australian patent box will support companies to keep the development of their IP and the value they create from it in Australia, to the economic and social benefit of all Australians.
Bridging the gap between R&D and commercialisation is core to ensuring that Australian medical and biotechnology researchers, companies, and manufacturers remain internationally competitive by making it genuinely more viable for Australian businesses to utilise, develop and create value from Australian IP in Australia. The incentive would work 'hand in glove' with the R&D Tax Incentive to keep the value creation in Australia.
Treasury's discussion paper outlines four key design features for feedback:
- Definition of medical and biotechnology – how these sectors or patents will be clearly identified.
- Eligible IP - only inventions claimed in standard patents granted by IP Australia, which have a priority date on/after 11 May 2021.
- Eligible profits/revenues – types of patent-related revenue that's eligible for the patent box.
- Majority of R&D must be conducted in Australia - complicit with OECD Nexus requirements.
AusBiotech's draft recommendations:
- Australia's patent box should look to a tested regime in a comparable ecosystem when considering key design elements. Notably the UK Patent Box should be seen as an exemplar for design elements such as (but not limited to) the competitive tax rate of 10 percent, transitional or introductory arrangements, and eligible patents.
- As the key consideration should be patent-ownership and point of taxation, provide eligibility to patents registered by Australian companies in jurisdictions of comparable quality for patent granting as Australia.
- Look to an already-legislated definition such as the definition of a therapeutic good as shown Section 3(1) of the Therapeutic Goods Administration Act 1989; do not use the International Patent Classification or Cooperative Patent Classification systems' classification of a patent to deem if a patent is 'medical or biotechnology'. Instead target the definition to enable the intended recipients to access to the programme.
- Given the Australian environment where many forms of R&D are unavailable or unworkable, apply an arrangement for research conducted overseas, where a substantive proportion or majority must be done in Australia, when assessing patent box claimants' substantial activity requirement. The RDTI provides a framework that could be applied.
- Rather than assessing eligibility on a patent-by-patent basis, simplify the approach by acknowledging a 'whole of product' approach. This would mean that once a product has an eligible patent, the product would be eligible. Also, noting the time between first patent application and first revenue is when the majority of the R&D in the process occurs, the patent box design needs in to take account the common and typical circumstances of medial and biotechnology development, where R&D may be preceded or followed by multiple patent filings of varying types on the one product or platform.
- To ensure some companies will be eligible to access the patent box in the next three to five years, create a transition arrangement such as that used by the UK, or simply ensure that all eligible patents granted as at the start date of the regime (i.e. patents in existence at 1 July 2022) should be eligible patents for patent box purposes. Additionality would be created as there would be an incentive to keep the value creation related to the IP in Australia.
As the national peak industry body, AusBiotech developed its draft submission in consultation with its Members, AusBiotech advisory groups, and through an information webcast that gathered and engaged more than 100 stakeholders.
AusBiotech encourages Members to read AusBiotech's complete draft response here
