On 11 May 2021, the Australian Government announced that it will introduce a patent box for eligible corporate income associated with new patents in the medical and biotechnology sectors. The patent box will apply to companies for income years commencing on or after 1 July 2022.
‘Patent box’ is a generic term for regimes that apply a concessional tax treatment to profits derived from eligible intellectual property (IP). Currently, over 20 jurisdictions, including the UK, Singapore and many European countries have patent boxes or other regimes that offer concessional tax treatments to IP derived profits.
The aim of the Government’s policy is to encourage companies to base their medical and biotechnology research and development (R&D) operations, and commercialise innovation, in Australia and to retain associated patent profits in Australia.
The objective of this discussion paper is to inform the Government’s consideration of the detailed design of the patent box announced in the 2021‑22 Budget.
The discussion paper references the OECD/G20 Forum on Harmful Tax Practice’s (FHTP) framework governing IP regimes, including the OECD’s Base Erosion and Profit Sharing (BEPS) Action 5 minimum standard. Pages 23‑36 of this OECD report may assist you with understanding the framework.