Patent Box Scheme – Tax Concessions for Medical and Biotechnology patent holders

A quick update following the release of the Federal Budget this week – the Patent Box Scheme has been expanded to include agricultural and low emissions technology sectors!  For patentees in this sector the scheme starts on 1 July 2023 and will cover patents (or PBRs) granted after 29 March 2022.

Tax concessions for Medical and Biotechnology patent holders

In 2021 ,the Australian government  announced it was going to introduce a “patent box” for income associated with patented inventions in the medical and biotechnology sectors.  The proposed bill entitled “The Treasury Laws Amendment (Tax concession for Australian Medical Innovations) Bill 2022” was introduced into Parliament on 10 February 2022.

A “patent box” is a patent regime used in a number countries including the United Kingdom, Singapore and Switzerland that provides a lower tax rate for certain forms of Intellectual Property.

The Australian “patent box” introduces a concessional tax treatment for income derived from exploiting a medical or biotechnology patent at an effective income tax rate of 17% to the extent the taxpayer undertakes the R&D underlying that patent in Australia.  The tax concession will apply to income earned after 1 July 2022.

The object is to provide an incentive for business to undertake or base R&D in Australia and to commercialise the patented inventions in Australia. 

Eligibility Criteria

  • The patent must be owned by an Australian company or foreign owned company that carries on a business in Australia.
  • The patent must be an Australian standard patent, a patent granted by the United States Patent & Trademark Office or a European Patent. 
  • The patent must be linked to a therapeutic good that is included in the Australian Register of Therapeutic Goods (ARTG).    By linked is meant that the therapeutic good contains or consists of a pharmaceutical substance or incorporates an invention that falls within the scope of a claim of the patent.  The term therapeutic good as defined in the TGA includes medicines, medical devices and other goods such as blood products and disinfectants.
  • The R&D must be carried out in Australia
  • The patent must be granted after 11 May 2021.

Introduction of the patent box has been welcomed by Australia’s health innovators.

The Australian Government is also consulting on the potential expansion of the patent box to low emission technologies

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