Our core client base is mid-sized business, across a range of industries including life sciences, manufacturing, food and beverage, and energy and resources. A rapidly growing part of our business involves supporting our clients to access grants and incentives for their development and R&D activities. We understand the untapped potential for R&D and innovation in Australia – the innovators are here, but the translation to commercialisation often takes place overseas. It is time to reverse that trend.
In consultation with patent attorneys from Griffith Hack, we have applied our expertise across patent law, R&D tax, corporate tax and industry specific knowledge to consider the challenges and opportunities for patent box here in Australia.
A primary challenge is ensuring that the effective concessional tax rate is competitive with international jurisdictions. The Government has proposed a rate of 17% which is still far higher than the concessional tax rate in other nations with a patent box. In the UK, this rate is 10% while the majority of European nations offer a concessional tax rate of 10% or lower. We urge the Government to consider a 10% concessional tax rate for Australia.
The administrative burden of applying for patent box has proved to be a deterrent in some jurisdictions, and the substantial activity requirement to apply for patent box here in Australia assumes processes and systems that many companies may not yet have. There is also a presumption that a company knows from the outset that its innovation will be patentable and / or it intends to patent the innovation. While there will be, by necessity, an increased compliance burden, focus should be on establishing simple and clear guidelines and the potential use of a self-assessment system. Consideration should be given to further mechanisms (such as safe harbour provisions) and alternative compliance requirements to reduce obstacles for SMEs seeking to benefit from the regime.
To further reduce complexities and administrative burden, we also suggest that the patent box regime is administered solely by the Australian Tax Office.
We look forward to the next update on the introduction of patent box here in Australia. Please reach out to learn if patent box is relevant to you.