Budget 2022: Patent box expanded to agriculture, low emissions tech

Companies working on innovations in the agriculture sector and those whose technology can help lower emissions could be eligible for the federal government’s patent box tax concessions, under a plan outlined in the federal budget tonight. 

Introduced in the 2021 federal budget, the patent box scheme is designed to encourage businesses to keep their research and development (R&D) activities in Australia, and to keep patents registered here. 

The initial version of the scheme allowed for income derived from Australian medical and biotech patents that are Australian-owned and have been developed locally to be taxed at a concessional rate of 17%. 

Now, the government wants to to extend the same tax treatment to “practical, technology-focused innovations” in the agricultural sector, and where the innovations can help to lower carbon emissions. 

For agricultural innovations, this will apply to patents linked to agricultural and veterinary chemical products listed on the Australian Pesticides and Veterinary Medicines Authority, the Public Chemicals Registration Information System, or eligible Plant Breeder’s Rights. 

The government intends for the concessional tax rate to apply to patents granted or issued after March 29, 2022, and for income years on or after July 1, 2023, but it says it will consult with industry before finalising the arrangements. 

Similarly, the government says it will apply the 17% concessional tax rate for low emissions innovations in the same timeframe, and again, will consult with industry. 

For both extensions of the scheme, income will only be eligible to be taxed at the concessional rate if the research and development took place in Australia. 

The government has also updated some of the provisions related to the patent box for innovations in the medical and biotech sector. 

The proposed extensions of the scheme are forecast to decrease the government’s receipts by a combined $40 million over the forward estimates, and increase payments by a combined $79.6 million.