Legislation launching a limited patent box scheme for the MedTech and BioTech sectors has been introduced to Parliament, but the government is racing against time to pass the bill before the upcoming election.
The Tax Concession for Australian Medical Innovations Bill 2022 was introduced to the lower house on Thursday morning by Assistant Treasurer Michael Sukkar.
The bill introduces a patent box scheme providing a tax break for income derived from a MedTech or BioTechnology patent in Australia.
Under the scheme profits from a MedTech or BioTech patent will be taxed at a concessional rate of 17 per cent, down from 30 per cent for large businesses and 25 per cent for smaller firms.
The profits will be determined as a proportion of the amount of research and development conducted in Australia based on the patent.
The patent box scheme was announced by the federal government in last year’s budget, with consultation running midway through last year.
The final version of the legislation confirms that the scheme will only apply to patents granted or issued after 11 May 2021, and will be limited to medtech and biotech, with the government opting to not extend it to low-emissions technologies for the time being.
The patent box scheme will cost the government an estimated $120 million over the forward estimates.
The patent box legislation will now be debated in the House of Representatives next week, but with Senate Estimates on all of next week, there are likely only three Senate sitting days left before the federal election.
Australian-founded MedTech firm ResMed welcomed the introduction of the patent box legislation.
“The pandemic has reminded us of the value of strengthening capabilities to locally design and build medical technology … a sustained and growing Australian medical science industry requires a strongly supported ecosystem of scientists and engineers dedicated to improving healthcare and the lives of others,” ResMed chief financial officer Brett Sandercock said.
“A patent box can help ensure that the entire industry of advanced medical technology and advanced manufacturing grows in Australia.”
Labor is yet to offer its full support for the scheme, with shadow industry minister Ed Husic last year questioned the delays in implementing the scheme, which has been discussed since 2015, and raised concerns it could be a “knee jerk reaction to embrace a new concept”.
“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 has to have legitimate R&D outcomes that benefit the country. The Coalition does not have an organised approach to innovation in this country.”
The Chief Economist was tasked with investigating such a scheme by the Coalition back in 2015, and was eventually lukewarm on the idea, saying it may lead to a large decrease in tax revenue but not a corresponding increase in an incentive to invest in research.
Numerous industry groups have called for the patent box scheme to go significantly further.
The Australian Investment Council said there is a “unique opportunity” in launching the scheme now, but that it should be expanded to all of the government’s priority sectors under the Modern Manufacturing Strategy, patent filings from 2018 onward should be eligible and the tax rate should be reduced to 10 per cent.
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