Australia Introduces Patent Box Tax Incentive

The Australian Government’s Budget 2021-2022 introduces a special tax rate (a “Patent Box”) for income derived from Australian patents in the medical and biotechnology fields.

From July 2022, income derived from Australian medical and biotech patents filed after that announcement will be taxed at a rate of 17%. Standard corporate tax rates in Australia are between 25% and 30%. The Australian Government has signalled it is open to expanding the technology fields that qualify for the Patent Box, particularly mentioning the clean energy sector.

The purpose of the Patent Box is to support businesses in commercialising their intellectual property and to encourage the manufacture of patented technologies in Australia. This may lead to an expansion of the high-tech (and high value) health research sector in the country.

Patent Boxes are part of many developed economies’ taxation systems, including Singapore, the United Kingdom, Ireland, France, the Netherlands, Spain and Poland.

New Zealand does not have a Patent Box tax concession, so any income derived from New Zealand patents does not have a special tax treatment. There also seems to be no consideration from the New Zealand Government for the introduction of such a scheme.

With the introduction of the Australian Patent Box being the latest and largest of New Zealand’s trading partners to add new tax incentives targeting the high-tech sector, New Zealand risks losing innovative companies overseas if it does not follow suit.

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