Patent box scheme changes still don’t go far enough

Denham Sadler
National Affairs Editor

The revamped patent box scheme still doesn’t go far enough and is uncompetitive with comparable jurisdictions, BDO R&D partner Nicola Purser says.

The new version of the scheme, announced by the federal government in last week’s budget, will still likely only benefit large companies which would have commercialised IP in Australia anyway, rather than encouraging smaller firms to come to Australia or remain here, Ms Purser said.

The 2022-23 federal budget included a series of reforms to the proposed patent box scheme, which is still yet to be passed by Parliament after being announced a year ago by the Coalition.

BDO R&D partner Nicola Purser

The scheme will offer a concessional tax rate for companies commercialising eligible patents in Australia, with an effective income tax rate of 17 per cent for eligible patents, down from 30 per cent for large businesses and 25 per cent for SMEs. This relates only to profits generated from eligible patents conducted in Australia.

The original scheme announced last year applied only to the biotech and medical technology sectors.

The reforms announced last week will expand the patent box regime to the agricultural and low-emissions technology sectors, and also broaden the program to make patents obtained in the US and European Union eligible.

Ms Purser said these reforms are positive, but not nearly enough to make the scheme comparable with those in other jurisdictions, particularly across Europe.

“Some of our concerns are that the rate that’s being offered at 17 per cent isn’t that competitive when we look at other jurisdictions globally,” Ms Purser told

“And we’re concerned about the targeting of particular industries, rather than making it industry agnostic, like in Europe.”

Several other nations offer patent box schemes with a significantly lower tax rate than that being proposed in Australia. In the UK the patent box scheme gives a 10 per cent tax rate, as does France, while the Netherlands scheme comes with a 5 per cent tax rate.

These schemes are also not restricted to particular industries as Australia’s will be.

In its current form the proposed scheme will do little to help smaller local companies, Ms Purser said.

“Because you need a significant income stream to make it worthwhile to go through the process of determining what’s eligible, it’s really only going to affect those large players, and they’re the ones that have the ability to move that IP to the other jurisdictions,” she said.

“It’s not going to attract companies. Those who would be doing it anyway might take advantage of it. Whether it’s going to really ultimately achieve their aims, it’s a bit unlikely.”

Legislation for the original version of the patent box was introduced to Parliament in February but is yet to pass the lower house, and will lapse following the upcoming election.

The Opposition has shown some scepticism to the patent box scheme, with Shadow Industry minister Ed Husic saying last year that it risks being a “knee-jerk reaction to embrace a new concept” and one that provides a tax break to larger firms with no benefit to the rest of society.

“We’ll wait and see what the government says, but so far it looks like the patent box is a great innovation for company products and does not do very much in terms of innovative output. We have to see what’s going to happen there,” Mr Husic said last year.

“This cannot simply be a method to reduce a tax bill. It is to have legitimate R&D outcomes that benefit the country.”

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1 Comment
  1. Great article Denham and Ms Purser.
    If the intention of the recent Government budget is to drive innovation through new technologies, it has missed its mark.
    If it is to truly drive innovation and commercialise new technologies, it should be industry agnostic, as innovation occur across all sectors. The Government is trying to pick winners and drive investment in specific sectors but in doing so, may be stifling investment in others. Why does it matter what industry the investment and innovation occur in?

    Is it too little, too late? It can be a long road to achieve Patent Approval, let alone to commercialise and be profitable. Our recently approved Australian Patent for ForgetSPECS took three years and tens of thousands of dollars.

    Patent costs are very expensive. An additional option may be adding Patent Costs to allowable deductions in the R & D Tax Incentive Scheme. This would subsidise a proportion of the Patent Cost and may increase the likelihood of success and volume of patents approvals. Innovators and Entrepreneurs need support at an earlier stage when they are applying for patents.

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