Consultation on the design of the Australian patent box has been opened by Treasury, after the Federal Treasurer announced the policy for the medical and biotechnology sectors during the 2021 Federal Budget.
Following discussion with industry bodies, and critical in determining the policy's design, Treasury has clarified the aim of the Government's policy:
- 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.
- To retain the ownership of eligible patented inventions in Australia.
The consultation'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.
A well-designed patent box will help bridge the gap to commercialisation, and support companies to keep the development of their IP and the value they create from it - especially by manufacturing locally - in Australia to benefit Australians. It will offer sound, long-term structural policy that will benefit the country.
