BILLS DIGEST No. 49, 2021–22    15 March 2022

Treasury Laws Amendment (Tax Concession for Australian Medical Innovations) Bill 2022

Ian Zhou
Economic Policy Section

Glossary

Purpose of the Bill

Background

Committee consideration

Policy position of non-government parties/independents

Position of major interest groups

Financial implications

Statement of Compatibility with Human Rights

Structure of the Bill

Key issues and provisions

Concluding comments

Date introduced: 10 February 2022

House: House of Representatives

Portfolio: Treasury

Commencement: The Bill commences on the first 1 January, 1 April, 1 July or 1 October to occur following Royal Assent.

The amendments apply to patents granted or issued after 11 May 2021 in respect of income years starting on or after 1 July 2022.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at March 2022.

1 Glossary

Abbreviation

Definition

ARTG

Australian Register of Therapeutic Goods

BEPS

Base erosion and profit shifting

EM

Explanatory Memorandum to the Treasury Laws Amendment (Tax Concession for Australian Medical Innovations) Bill 2022

IP

Intellectual property

ITAA 1997

Income Tax Assessment Act 1997

NANE income

Non-assessable and non-exempt income

OECD

Organisation for Economic Co-operation and Development

R&D

Research and development

2 Purpose of the Bill

The purpose of the Treasury Laws Amendment (Tax Concession for Australian Medical Innovations) Bill 2022 (the Bill) is to amend the Income Tax Assessment Act 1997 (ITAA 1997) to introduce a ‘patent box’ tax regime. The patent box regime aims to incentivise companies to:

• base their medical and biotechnology research and development (R&D) operations in Australia and

• commercialise their patents in Australia.¹

The Bill fully implements the ‘Patent Box – tax concession for Australian medical and biotechnology innovations’ measure from the 2021–22 Federal Budget.²

3 Background

What is a patent box?

A patent box is a tax regime that provides a lower or concessional tax rate for income derived from certain forms of intellectual property (IP)—typically patents but sometimes other forms of IP such as designs and copyright material.

Patent box gets its name from the box on an income tax form that companies check if they have qualified IP income.³ Alternatively, a patent box may also be viewed as a metaphorical box: patents meeting stated criteria—that is, patents that are ‘in the box’—receive a concessional tax rate for the income they generate.

What was proposed in the Budget?

In the 2021–22 Budget, the Government proposed its patent box tax regime would provide a 17% concessional tax rate for corporate income derived directly from Australian medical and biotechnology patents.⁴

Figure 1 below shows that the 17% concessional tax rate of the proposed patent box is considerably lower than the usual corporate tax rate (from 2021-22 onwards).

Chart, bar chart Description automatically generatedFigure 1: patent box’s concessional tax rate compared to corporate income tax rate

Source: Parliamentary Library estimates based on Australian Government, Budget Measures: Budget Paper No. 2: 2021–22, 23; Australian Taxation Office (ATO), ‘Changes to Company Tax Rates’, ATO website, 28 October 2021.

Why is the Government introducing a patent box?

R&D activities are widely perceived to have positive benefits (known as ‘positive externalities’) that spill over to other parts of the economy and benefit the rest of society. As such, many governments around the world attempt to promote R&D activities through a combination of direct investment and tax incentives.

Currently, over 20 countries have some form of patent or IP box tax schemes.⁵ While patent box tax regimes can differ widely in their scope, they are mostly designed to achieve some or all of the following objectives:

• promote increased investment in R&D activities

• promote the commercialisation of research

• prevent the erosion of domestic tax base that can occur when mobile sources of income are transferred to other countries.

The assumption underlying all three objectives is that IP is highly mobile and companies that own IP can relocate these assets to countries that provide favourable tax treatment.⁶ For example, when a company develops a patent in Australia, it can choose to commercialise the patent by licencing the use of the patent to an Australian or an overseas manufacturer.

Patent box tax regimes are typically intended to incentivise companies to commercialise their patents ‘onshore’ in the host country by providing concessional tax treatment, thus capturing at least some taxes in the host country, rather than losing all income generated from patents to an overseas country.

The OECD recommendations to tackle tax avoidance

Governments around the world have increasingly sought to modify their tax regimes to incentivise the retention and acquisition of IP. This competition between countries has resulted in ever more generous tax regimes that enable multinational enterprises to access low tax rates for IP related income without contributing significant amounts of R&D expenditures in the host country.⁷

The Organisation for Economic Co-operation and Development (OECD) considers this type of competition to be a harmful tax practice.⁸ In other words, patent box tax regimes can potentially give rise to harmful tax practices that will lead to ‘a race to the bottom’ if they are designed or implemented poorly.

Consequently, the OECD/G20 BEPS (Base Erosion and Profit Shifting) Project provides 15 action plans that equip governments with instruments needed to tackle harmful tax avoidance behaviours.⁹

The Australian Government said it would follow the OECD’s guidelines to ensure that its patent box regime meets internationally accepted standards.¹⁰ In July 2021, the Treasury released a Discussion Paper on the policy design of the Government’s proposed patent box.¹¹ Details of the Australian patent box design are discussed below in the ‘Key issues and provisions’ section of this Digest.

Stakeholders’ commentary: is the Australian patent box’s 17% concessional rate competitive?

There are policy debates regarding whether the proposed 17% concessional tax rate of Australia’s patent box is a suitable rate.

Several stakeholders urged the Government to implement a 10% concessional tax rate.¹² For example, Grant Thornton (a tax advisory firm), argued that a 10% tax rate will ensure Australia remains competitive with other countries:

The UK’s patent box regime offers an effective concessional tax rate of 10%, and the majority of European nations offer an effective concession tax rate of 10% or lower… To remain competitive internationally, we propose an effective concessional tax rate to 10% (as opposed to 17%) for companies on eligible profits from eligible patented inventions. This is in line with the stated objectives of the patent box to increase R&D activities undertaken and commercialisation of inventions in Australia.¹³

Stakeholders’ commentary: (continued)

Tax Foundation (a US think-tank) has noted that many European countries offer additional R&D incentives, such as direct government support, R&D tax credits, or accelerated depreciation on R&D assets. Therefore, the effective tax rates on IP income in European countries can be even lower than the nominal tax rates stated in their respective patent box regimes.¹⁴

On the other hand, Science and Technology Australia (a peak body representing scientists) argued that ‘the patent box concessional tax rate of 17% is optimal under the current tax system’.¹⁵ Furthermore, the stakeholder urged the Government to:

peg the concessional tax rate at 60% of the average corporate tax rate in Australia to create a stable investment setting into the future.¹⁶

In other words, if Australia’s corporate tax rate (currently at 30% for large companies and 25% for medium and small businesses) changes in the future, then the patent box’s concessional tax rate should also change accordingly.

Science and Technology Australia argued that a peg will signal strongly to industry that the patent box concession will always be valuable regardless of changing corporate tax rates, and this will support long-term investment.¹⁷

The proposed patent box’s 17% concessional tax rate is almost at the peg suggested by Science and Technology Australia (17 ÷ 0.6 ≈ 28.33, almost at Australia’s corporate tax rate).

Opening a ‘box’ of worms – is a patent box a good or bad idea?

The debate around the benefits of patent box tax concessions is highly contested, with no consensus view emerging as to their overall effectiveness. The following three questions are central to any debate on patent box tax regimes:

• does a patent box promote economic growth and innovation?

• do potential benefits of a patent box outweigh its drawbacks?

• are there better alternative policy tools to promote innovation?

In 2015, the Department of Industry, Innovation and Science (DIIS) published a report titled Patent Box Policies.¹⁸ The report found that a patent box in Australia should lead to an increase in the number of patent applications. However, this increase would largely be the result of ‘opportunistic’ behaviour and would not reflect a genuine increase in inventiveness.¹⁹ As such, the report concluded:

patent boxes are not a very appropriate innovation policy tool because they target the back end of the innovation process, where market failures are less likely to occur.²⁰ [emphasis added]

In 2016, the Joint Select Committee on Trade and Investment Growth’s Inquiry into Australia’s Future in Research and Innovation also cautioned:

If a patent box is introduced, it should be subject to a sunset clause after three years of operation. A review should be undertaken to determine the effectiveness of the patent box scheme and whether it should be extended and for how long.²¹ [emphasis added]

The Bill does not contain a sunset clause as recommended by the Joint Select Committee.

The conclusions reached by the 2015 DIIS report have been disputed by many industry stakeholders.²² Advocates of a patent box (for example, pharmaceutical companies) argue that the tax regime will encourage companies to increase investment in R&D activities and enable patents to be domiciled in the host country for tax purposes.²³

Due to the increased investment in R&D activities, the advocates argue that the lower tax rates introduced by a patent box regime will eventually attract more patents and lead to economic growth.²⁴ This type of argument is typically known as the ‘Laffer Curve argument’ (sometimes criticised as ‘Voodoo Economics’),²⁵ which has often been used to justify tax cut policies.²⁶

Furthermore, the advocates believe that a patent box can be more effective than R&D Tax Incentive programs in promoting the commercialisation of research.²⁷ They argue that Australia’s current R&D Tax Incentive program is ‘input‐based’—that is, the program encourages companies to invest in eligible R&D activities, and in return the companies receive a tax benefit regardless of whether they decide to commercialise their research in Australia.

In contrast, a patent box is an ‘output‐based’ measure that provides a lower tax rate for corporate income generated from patents filed and granted—that is, after the R&D has already occurred in Australia.²⁸ If a patent is not commercialised and generates no income, then the patent owner is unable to receive any tax benefit from the patent box’s concessional rate. As such, the advocates believe a patent box regime will be effective to incentivise companies to commercialise their patents onshore in Australia.

Evidence for and origins of the proposed medical and biotechnology patent box regime

It is arguable that the Bill is a policy response to sustained industry representations to the Government rather than a regulatory response informed by a substantive body of generally accepted evidence.

As noted above, the lack of a firm and accepted evidence base regarding the effects of patent box tax concessions has resulted in a lack of a consensus view as to their overall effectiveness. This means that the evidence for the need for a patent box regime is, at best, contested.

Despite the contested evidence, stakeholders in the Australian medical and biotechnology sector have been advocating for such a regime for many years. As noted in the Regulatory Impact Statement:

Certainly, [the medical and biotechnology] industry has been the most active in advocating for a patent box with a competitive concessional rate on eligible patents. This industry also has experience with patent box regimes in other jurisdictions and has indicated it can comply with the regulatory burden consistent with other foreign patent box regimes. For the above reasons, in the 2021-22 Budget the Australian Government announced its intention to introduce a patent box regime for the medical and biotechnology sector, and that it would consult with industry on the design of the patent box prior to making a final decision on the regime.²⁹ [emphasis added]

Stakeholders’ commentary: should Australia’s patent box expand to cover more sectors?

Some stakeholders question why only medical and biotechnology patents will be within the scope of Australia’s patent box.

For example, Science and Technology Australia urged the Government to ‘expand the patent box swiftly to clean energy technologies amid the urgent challenges of climate change.’³⁰

In an interview with the Australian Financial Review, Oliver Yates, former CEO of the Clean Energy Finance Corporation, said it did not make sense for one area of innovation to be rewarded over others:

It’s not so much about the clean energy sector, but there’s a whole series of areas where Australia has shown leading technology – automation, GPS, self-driving cars – the idea that it [patent box] should limit this to one area rather than recognising innovation in all of its forms is just astounding.³¹

Griffith Hack, a firm that specialises in IP law and services, said:

A cynic might suggest that by landing on the medical and biotech sector, the Federal Government exposes itself to little downside because of the long path to market of many products in this sector. Through a “COVID-19 lens”, extending the incentive to technologies which Australia will need to rely upon in the future for economic success makes sense. Politics aside, this [patent box] must include clean and green energy. The defence sector also comes to mind.³² [emphasis added]

The Treasurer said the Government will consult with industry stakeholders on expanding the patent box regime to Australia’s clean energy sector.³³

Committee consideration

Senate Standing Committee for the Scrutiny of Bills

At the time of writing, the Committee has not considered this Bill.³⁴

4 Policy position of non-government parties/independents

Official position

At the time of writing, non-government parties and independents have not made official comments on the Bill.

Media speculation

Kim Carr, a Labor Senator from Victoria, indicated in a media article in May 2021 that he would not support the introduction of a patent box regime. Senator Carr said:

The history of patent boxes in other countries suggests that we should be wary of measures that increase the risk of lost revenue without guarantees of compensatory increases in economic activity…

What patent boxes really do is create an incentive for multinational companies to move their intellectual property around between jurisdictions, which opens the possibility of rorting…

The Morrison Government’s decision to take the patent-box option indicates its confusion about innovation, and industry policy in general.³⁵ [emphasis added]

The Opposition has yet to make a comment on the Bill. As such, it is not clear if the above remarks by Senator Carr reflect the current ALP policy position in relation to the measures proposed by the Bill.

5 Position of major interest groups

Medical and pharmaceutical industry

Medical and pharmaceutical industry associations are supportive of the Bill. For example, Medical Technology Association of Australia (MTAA) issued a press release:

MTAA has welcomed the introduction of the Government’s Patent Box Bill into the House of Representatives this week, which aims to spur on local medical technology innovation and investment into the future. The Patent Box was first proposed and championed by MTAA in 2015, and since then has been supported by a growing number of stakeholders across the MedTech [Medical Technology] industry and wider health sector.³⁶

Similarly, Medicines Australia, an industry association representing members of the medical industry, said:

This legislation is a welcome first step, and we will continue to encourage stronger and bolder incentives to promote and protect Australian innovation. The proposed design of the patent box, tabled in Parliament yesterday, could go further to attract multinational biopharmaceutical companies to invest in developing or manufacturing medicines and vaccines onshore. Australia still faces significant barriers, such as a smaller population and remote geographical location to other jurisdictions. We look forward to a continuing constructive partnership with the Government to increase the competitiveness of the patent box.³⁷ [emphasis added]

These industry associations are broadly supportive of patent box, but they may have concerns or recommendations regarding specific aspects of the regime. The specifics are discussed below in the ‘Key provisions and issues’ section of this Digest.

Tax advocacy groups and academics

Some think-tanks and academics oppose the Government’s proposed patent box regime because they believe it will lead to ‘tax lurk’. For example, David Richardson, a Senior Research Fellow at the Australia Institute, said:

If we genuinely want to promote Australian manufacturing in the medical and biotech industries there are better mechanisms that might be considered. Similarly if we want to encourage R&D there are much better mechanisms. The patent box risks merely adding another tax lurk for multinationals in a race to the bottom against other patent boxes in the UK and elsewhere.³⁸ [emphasis added]

Dr Isaac Gross of Monash University argues:

In short, a patent box is good in theory but bad in practice; and the design of the Australian government’s patent box is particularly bad. It will likely end up being just another way multinational companies can avoid paying tax.³⁹ [emphasis added]

Tax Justice Network, an advocacy group calling for ‘tax justice’ and ‘fairer’ tax systems, expressed several concerns regarding the proposed patent box. The group said:

We are concerned that introducing the patent box regime for the medical and biotechnology sectors will give away tax revenue for activities corporations would have already carried out. Further, we are concerned that once introduced, the patent box regime will be expanded over time to reduce the tax contributions corporations need to make on revenue derived from patents related to other business sectors. We are further concerned about the complexity of ensuring the integrity of the claims made by corporations against the lower tax rate in the patent box regime. As a result, there will be an incentive for corporations to seek to claim as much of their income as possible falls within the lower tax rate of the patent box.⁴⁰ [emphasis added]

6 Financial implications

According to the Explanatory Memorandum (EM), the measure introduced by the Bill is estimated to decrease the underlying cash balance by $120 million over the forward estimate period.⁴¹

All figures in this table represent amounts in $million.⁴²

2020–21

2021–22

2022–23

2023–24

2024–25

0.0

0.0

0.0

-50.0

-70.0

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.⁴³

Parliamentary Joint Committee on Human Rights

At the time of writing, the Committee has not considered this Bill.⁴⁴

7 Structure of the Bill

The Bill has one Schedule comprising three Parts:    

• Part 1 is titled main amendments and amends the ITAA 1997 to introduce a patent box regime

• Part 2 is titled other amendments and inserts definitions of key terms into the ITAA 1997

• Part 3 sets out the application and transitional provisions for the patent box regime in the Income Tax (Transitional Provisions) Act 1997.

8 Key issues and provisions

Item 1 in Part 1 of the Bill inserts proposed Division 357—Patent box into the ITAA 1997. Item 1 specifies the eligibility criteria for the patent box regime (for example, who is eligible for the patent box regime, what patents qualify for the regime).

Who is eligible for the patent box?

To be eligible to receive the concessional tax treatment of the patent box regime, an entity must be defined as a ‘R&D entity’ as per section 355-35 of the ITAA 1997, which applies to the existing R&D Tax Incentive program. In other words, an eligible R&D entity for the patent box must be a company that is a resident of Australia for income tax purposes or a foreign resident operating through a permanent establishment in Australia subject to a double tax agreement.⁴⁵

It appears that the Government’s intention is for the patent box to apply to companies only.⁴⁶ However, by relying on the definition of R&D entity in section 355-35 of the ITAA 1997, it means public trading trusts with a corporate trustee may also be eligible for the patent box.⁴⁷ It is unclear if this is intended by the Government.

Explainer: what defines a company as a resident of Australia?

A company is a resident of Australia for income tax purposes if:

• it is incorporated in Australia, or

• it carries on business in Australia and has either

– its central management and control in Australia, or

– voting power controlled by shareholders who are residents of Australia.

Details on income tax residency are provided on the ATO website.⁴⁸

Patentee vs licensee

Furthermore, only patentees who hold rights over a medical or biotechnology patent will be eligible.⁴⁹ An exclusive licensee of a patent does not satisfy this definition, as they hold rights under the licence agreement as licensee, rather than rights under the patent as patentee.⁵⁰

Explainer: what is a patentee?

A patentee is typically someone (or a corporation) who invents a product and files it as a patent with patent offices. Although the patentee invented the patented product, they may not have the expertise or resources to bring the product to a market-ready state.⁵¹

A licensee is typically someone (for example, a manufacturer) who is granted a licence by a patentee to put the patented invention into commercial use.⁵²

What patents are eligible for the patent box?

To be eligible, a medical or biotechnology patent must be linked to a therapeutic good registered on the Australian Register of Therapeutic Goods (ARTG).⁵³ A medical or biotechnology patent qualifies if it is one of the following:

• an Australian standard patent granted by the Commissioner of Patents

• a United States utility patent issued by the United States Patent and Trademark Office

• a European patent granted under the European Patent Convention.⁵⁴

Only patents granted or issued after the Federal Budget announcement on 11 May 2021 will be eligible for the patent box.⁵⁵ The patent box regime will commence on 1 July 2022.⁵⁶

For example, if an Australian company has:

• been granted a medical patent on 12 May 2021 in the United States and

• the patent is linked to a therapeutic good registered on the ARTG and

• the company has made R&D expenditures linked to that patent in Australia⁵⁷ and

• the company derives income from the patent in Australia

then the company may be eligible to receive the concessional tax treatment of the patent box regime from 1 July 2022 onwards.

Stakeholders’ commentary: should Australia’s patent box also apply to patents granted in the US or Europe?

The Government’s proposal to include patents granted in the US or Europe (in addition to patents granted in Australia) in the proposed patent box regime is a policy adjustment from its earlier position. In July 2021, a discussion paper released by the Treasury proposed that ‘only inventions claimed in standard patents granted by IP Australia… will be eligible’.⁵⁸

In the consultation process that followed the release of the discussion paper, several stakeholders argued that patents granted in some overseas countries should also be eligible. For example, CSL Limited (a biotechnology company), said Australia’s patent box should broadly encompass patents filed internationally because:

A patent provides its owner with a right to prevent third parties from making and selling the owner’s inventions. As a result, where patents are filed is mostly based on the location of actual and expected sales and manufacturing, rather than where the patent owner is based.

More specifically, given that the Australian market is much smaller than the American, European, and Asian markets it is often more appropriate and advantageous to file patents in those markets, with Australia often being a lower priority. Ownership of the patent and the location of the R&D activities, is the key issue, as opposed to where it is filed.⁵⁹ [emphasis added]

Explainer: how many patent applications are filed worldwide and in Australia?

Over 3.2 million patent applications were filed in 2020 worldwide.⁶⁰ The majority of these patent applications were filed with the patent offices in three countries: China, the United States, and Japan.⁶¹

In Australia, a total of 29,758 standard patent applications were filed in 2019.⁶² Out of these 29,758 applications, over 9,000 applications were related to medical technology, pharmaceuticals, or biotechnology.⁶³

In 2018, Australian residents filed 3.2 patent applications overseas for every standard patent application that they filed in Australia.⁶⁴

Like most things in life, not all patents are created equal. While some patents are filed by large pharmaceutical companies which may derive substantial income from them, other patents may never be put into commercial use.

Election for the patent box to apply

The patent box regime is optional, meaning a taxpayer must ‘elect’ or choose for the regime to apply. This election is irrevocable and applies prospectively.⁶⁵

The election must be made before or at the time the taxpayer is required to lodge their income tax return for the relevant income year.⁶⁶ Practically speaking, this means Australian medical and biotechnology companies should consider whether to opt into the patent box by the time their tax return is due for the first applicable income year.

The EM clarifies that although it is not possible for a taxpayer to make a patent box election that has retrospective effect, where income is derived in an income year prior to the remaining conditions of the patent box regime being satisfied (for example, milestone payments being received), the taxpayer can later seek to amend their income tax return in order to claim the tax concession in respect of that income once those conditions are satisfied, provided they have made the required election on time.⁶⁷

What income is concessionally taxed?

The Bill provides a 17% concessional tax rate for the proportion of a patent box income stream that is attributable to the taxpayer’s development of the patent that underlies that income.⁶⁸

What is a patent box income stream?

A Patent box income stream is defined in proposed subsection 357-25(3) of the ITAA 1997 as assessable income derived from:

• sales or rental income derived by the taxpayer from the sale or dealings of a therapeutic good linked to the taxpayer’s eligible patent or patents

• royalties or licence fees derived by the taxpayer for granting rights to exploit the taxpayer’s eligible patent or patents

• a balancing adjustment event derived from proceeds of sale received by the taxpayer from the sale or assignment of the taxpayer’s eligible patent or patents

• damages or compensation payable to the taxpayer in respect of the taxpayer’s patent or patents.⁶⁹

Notably, income from manufacturing remains excluded from the scope of the patent box.⁷⁰

Figure 2 below shows only income generated directly from patented products will be eligible for the patent box. Income due to manufacturing, branding and other attributes of patented products will not be eligible.

Chart, treemap chart Description automatically generatedFigure 2: income derived directly from eligible patents can receive the 17% concessional tax rate under the patent box

Source: Australian Government, 2021–22 Budget’s Tax Factsheet, p. 3.

Steps for determining income streams

Proposed subsection 357-25(1) of the ITAA 1997 provides that taxpayers are required to identify a patent box income stream in order to access the concessional tax treatment provided by the proposed patent box regime. In other words, it is up to corporate taxpayers to record and identify whether their income (for example, royalties from a patent) meets the requirements set out in proposed section 357-25.

Under proposed subsection 357-25(1) a corporate taxpayer seeking to access the patent box regime will need to work out the portion of their assessable income attributable to eligible patents by undertaking the following steps:

• Step 1: identify all eligible patents that underlie the patent box income stream

• Step 2: determine a reasonable apportionment of the income arising from the patent box income stream that is attributable to those patents by undertaking a full transfer pricing analysis consistent with OECD principles

• Step 3: reduce that amount to reflect the extent of the taxpayer’s Australian R&D activities, using an R&D fraction formula which is consistent with the formula set down by the OECD in the BEPS Action 5 Report on Harmful Tax Practices (see discussion about the ‘nexus approach’ below)⁷¹

• Step 4: multiple the result of step 3 by the patent box NANE fraction to determine the amount deemed to be non-assessable and non-exempt income (‘NANE’ income) to achieve an effective tax rate of 17%.⁷²

The relevant steps are discussed below.

Step 1: Identify eligible patents

The first step is for the taxpayer to identify all eligible patents that underlie the patent box income stream. To be eligible the patent must meet the requirements set out in proposed sections 357-15 and 357-20 discussed earlier in this Digest:

• it must relate to a medical or biotechnology patent (issued in Australia, the United States or European Union) granted or issued after the Federal Budget announcement on 11 May 2021 and

• be linked to a therapeutic good registered on the Australian Register of Therapeutic Goods (ARTG).⁷³

Step 2: determine the proportion of the patent box income stream attributable to eligible patents

The second step is for the taxpayer to determine a reasonable apportionment of the assessable income arising from the patent box income stream attributable to the underlying patents by undertaking a full transfer pricing analysis consistent with:

• the OECD Transfer Pricing Guidelines or

• if relevant, the OECD Model Tax Convention on Income and Capital, together with its commentaries, in respect of Article 7 and

• a document or part of a document prescribed by the Regulations, so as to enable amendments to the above documents to be adopted as necessary.⁷⁴

The EM notes:

Where the patent does not account for the entire value received for the good, the income unrelated to the patent must be separated from the income derived from the patent. A medical device may have an embedded patent in the form of certain technology, but the value of that device may also be attributable to the hardware, branding, marketing and other embedded patents held by competitors and licenced by the taxpayer.

Where, for example, ordinary income derived from the sale of therapeutic goods may be attributable to the marketing and manufacturing of those therapeutic goods, as well as the underlying patent, it is only the reasonable apportionment of this income attributable to the patent that is intended to benefit from the patent box regime.

This reasonable apportionment approach requires the taxpayer to identify the portion of the patent box income stream that is attributable to the underlying patent in a manner that best achieves consistency with the relevant OECD documentation outlined above.⁷⁵

The EM provides two useful examples that show how a company can determine a reasonable apportionment of its income from eligible patents.⁷⁶

Issue: compliance costs

The EM acknowledges that the patent box regime has high ongoing compliance costs for companies wishing to receive the concessional tax rate.⁷⁷ As an analogy, when a person lodges their tax return, it is their responsibility (rather than the ATO’s responsibility) to keep track of all the receipts and this may be time consuming for the person. Steps 1 and 2 of in proposed subsection 357-25(1) will require careful record keeping of patents and attribution of income to eligible patents.

However, the Regulatory Impact Statement notes that in relation to the increased compliance costs:

these costs can be significantly reduced by leveraging some of the compliance requirements businesses already incur to claim the R&DTI [Tax Incentive] or meet the TGA requirements. Participation in the patent box regime is optional, so firms whose costs are high relative to the benefits may elect not to take advantage of the concession.⁷⁸

Issue: transfer pricing

A large multinational company may have a manufacturing division in one country, a research division in another country, and a marketing division in a third country. These divisions of the same parent company may sell services or products to each other. A company can charge a higher price to its division in high-tax countries (reducing profits) while charging a lower price (increasing profits) for its division in low-tax countries.⁷⁹ This is known as ‘transfer pricing’.

International sales between two subsidiaries or divisions of the same parent company must be made using the ‘Arm’s Length Principle’, meaning that the prices charged should be reasonable market price, as if the two divisions were unrelated independent parties.⁸⁰ The Arm’s Length principle is supported by all OECD countries (including Australia).⁸¹

In the context of the Bill, the EM clarifies that when a company identifies income that is derived from exploiting an eligible patented invention, the portion of the income that is attributable to that patent must be determined so as best to achieve consistency with OECD transfer pricing principles.⁸² Put simply, a multinational company cannot illegally shift its profits between its subsidiaries while also try to benefit from the concessional tax rate of the patent box.

Stakeholders’ commentary: what are the major tax implications that could flow from this calculation of income streams?

Baker McKenzie, a multinational law firm, said:

Importantly, the effect of making a portion of the patent box income stream NANE income is that the taxpayer will no longer be entitled to claim deductions to the extent that their losses or outgoings are incurred in gaining or producing that NANE income. Taxpayers will need to ensure that expenses are apportioned on a reasonable basis.

This approach is consistent with the OECD's recommendations to ensure that deductions are claimed at the same rate as income. However, it introduces additional complexity as partial loss of deductions may have flow-on effects for the overall tax position, particularly for taxpayers with loss-making products. Taxpayers should carefully consider these impacts before opting in to the regime.⁸³ [emphasis added]

King & Wood Mallesons, another multinational law firm, also cautioned:

As there are inherent difficulties in valuing intangible assets like patents, it will be critical for multinational entities to prepare robust and defensible valuation and transfer pricing documentation, as well as ensure they do not fall foul of Australia’s general anti-avoidance provisions, in accessing this regime.⁸⁴

Step 3: determine the R&D fraction for the income year

The third step is for the taxpayer to determine their Australian R&D activities, using an R&D fraction formula that gives effect to the ‘nexus approach’ recommended by the OECD in the BEPS Action 5 Report on Harmful Tax Practices.

To give context to how the R&D fraction for an income year is determined under the Bill, a brief summary of the OECD ‘nexus approach’ is provided below.

The OCED BEPS ‘nexus approach’

BEPS Action 5 Report (OECD’s Base Erosion and Profit Shifting Action Plan) recommends countries adopt the modified nexus approach for patent box regimes to ensure that they do not give rise to harmful tax practices.⁸⁵ BEPS Action 5 is endorsed by all OECD and G20 countries (including Australia).⁸⁶

Explainer: what is the nexus approach?

The nexus approach⁸⁷ aims to ensure that the tax benefits received by multinational enterprises are commensurate with the level of R&D they undertake in a country.⁸⁸

Under the nexus approach, there must be a direct nexus or link between:

• the corporate income eligible for patent box concessional tax rates and

• the qualifying R&D expenditure that contributed to that income.⁸⁹

In other words, a company must have made ‘qualifying R&D expenditure’ in a country in order to enjoy the tax concession of a patent box regime in that country.

Whilst definitions of ‘qualifying R&D expenditure’ vary between countries, generally they are limited to expenditure incurred for the purposes of actual R&D activities, rather than expenditure on interest payments, building costs or other costs not linked to a specific IP asset.

Under the nexus approach, companies will need to keep track of their R&D expenditure and understand how their expenditure contributed to their IP income (proposed subsection 357-25(1) is discussed above).

Countries (such as Luxembourg) that enacted harmful patent or IP box regimes prior to the BEPS Action 5 Report have either abolished or amended their tax regimes to comply with the nexus approach.⁹⁰ Tax Foundation, a think-tank, commented:

As the Modified Nexus Approach for IP regimes has just recently been introduced [in 2015], not enough time has passed for a thorough analysis of its economic effects…

As with every change in tax policy, there are trade-offs. The Modified Nexus Approach adds an additional layer of complexity to the already complex issue of taxing IP income. Linking tax breaks for IP income to its associated R&D activity has changed the game and will likely result in some businesses restructuring and relocating their IP assets and R&D activity. Effective tax rates on IP income will likely play an important role in determining optimal locations, giving measures such as R&D credits more importance. Whether this new approach to IP taxation will impact profit shifting and which countries will be the winners and losers is yet to be seen.⁹¹ [emphasis added]

Australia’s patent box regime will comply with the nexus approach.⁹² Proposed subsections 357-25(1) and 357-30(1) of the ITAA 1997 specify that a taxpayer can only benefit from the concessional tax treatment of the patent box if the taxpayer incurs ‘qualifying R&D expenditure’ of eligible patents in Australia. Put simply, if a company does not undertake R&D activities in Australia, then it would not be able to receive the lower tax rate of the patent box.

R&D fraction

Pursuant to the requirements of the nexus approach set out above, taxpayers must keep track of how much R&D activity is undertaken in Australia. Only R&D expenditure incurred for the purposes of actual R&D activities (as defined in the R&D Tax Incentive program) in the development of an eligible patent can constitute qualifying expenditure for the purposes of the R&D fraction.⁹³

Proposed subsection 357-30(1) provides a formula to work out the R&D Fraction (that is the proportion of R&D activities eligible for the patent box’s concessional rate). The higher the fraction, the more patent box income that may be taxed concessionally:

A = Total amounts of taxpayer’s notional deductions for R&D expenditure in respect of a qualifying patent or patents.

B = Total expenditure incurred in respect of a qualifying patent or patents on R&D activities conducted outside of Australia by one or more associates of the R&D entity.

C = Total cost of each depreciating asset in respect of which the taxpayer can deduct an amount under Division 40 for the income year attributable to the qualifying patent or patents.⁹⁴

The numerator ‘A’ in the R&D Fraction captures only the R&D expenditure incurred by the taxpayer for R&D activities undertaken in Australia.

For ‘C’ an integrity rule can apply to deem the cost of an asset held by the R&D entity to be its market value if at the asset acquisition time, the R&D entity was not dealing at arm’s length and the asset’s cost was less than its market value.⁹⁵

A 30% uplift is then applied to the fraction. The EM clarifies that this uplift only applies to the extent that the numerator does not surpass the denominator as the R&D Fraction is capped at one. The R&D Fraction is cumulative, including all R&D expenditure from previous years.⁹⁶

Stakeholders’ commentary: what are the major tax implications that could flow from the nexus approach?

Allens, an international law firm, said:

Businesses that record expenses on a projects basis, rather than by direct reference to the relevant patented invention, will likely face accounting issues to accurately assign revenue to individual patents or families of patents. There are also a number of broader legal issues to consider, including the common scenario where, within a corporate group, the owner of a patent is different from the entity which [is] generating revenue from the patent. This issue may be amplified in situations where the IP owner is based abroad and licenses the patent to an Australian operating entity.⁹⁷

Baker McKenzie, another multinational law firm, commented that:

a taxpayer who outsourced the R&D activities to a related party overseas… or acquired intellectual property developed by another party, would have an R&D fraction of less than 1. As such, outsourcing clinical trials to a related party overseas may reduce the patent box income that qualifies for concessional tax treatment.⁹⁸

Step 4: determine deemed amount of NANE income to achieve an effective tax rate of 17%

The fourth step is to determine the amount deemed to be NANE income to achieve an effective tax rate of 17%.⁹⁹

This is done by multiplying the R&D Fraction (the result of step 3) by the patent box NANE fraction. The patent box NANE fraction is determined by the formula in proposed subsection 357-25(7):

The effect of this is to achieve an effective tax rate of 17% in respect of the relevant income from the patent box income stream.¹⁰⁰

Concluding comments

The Bill introduces a patent box regime that aims to incentivise companies to commercialise their patents in Australia. The Bill appears to be a policy response to sustained representations from industry, rather than a regulatory response informed by a substantive body of generally accepted evidence.

Nonetheless, the rather narrow measures (that focus on the medical and biotechnology sector) proposed by the Bill complement the Government’s announcements regarding an additional $2 billion investment in the R&D Tax Incentive program¹⁰¹ and a $2.2 billion investment in the University Research Commercialisation Action Plan,¹⁰² all of which may be viewed as part of the Government’s broader efforts to boost innovation.

The proposed patent box regime is wider in scope than what was announced in the 2021-22 Budget (for example, the regime will apply to patents granted in the US and Europe). The regime may expand further in the future to include Australia’s clean energy sector and other industries.

Given there are diverging views on the effectiveness of patent boxes, potential points of contention regarding the Bill include:

Should Australia introduce a patent box?

Is the 17% concessional tax rate a suitable rate?

Should the scope of the patent box be amended to apply more broadly?

© Commonwealth of Australia

Creative Commons

With the exception of the Commonwealth Coat of Arms, and to the extent that copyright subsists in a third party, this publication, its logo and front page design are licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia licence.

In essence, you are free to copy and communicate this work in its current form for all non-commercial purposes, as long as you attribute the work to the author and abide by the other licence terms. The work cannot be adapted or modified in any way. Content from this publication should be attributed in the following way: Author(s), Title of publication, Series Name and No, Publisher, Date.

To the extent that copyright subsists in third party quotes it remains with the original owner and permission may be required to reuse the material.

Inquiries regarding the licence and any use of the publication are welcome to webmanager@aph.gov.au.

Disclaimer: Bills Digests are prepared to support the work of the Australian Parliament. They are produced under time and resource constraints and aim to be available in time for debate in the Chambers. The views expressed in Bills Digests do not reflect an official position of the Australian Parliamentary Library, nor do they constitute professional legal opinion. Bills Digests reflect the relevant legislation as introduced and do not canvass subsequent amendments or developments. Other sources should be consulted to determine the official status of the Bill.

Any concerns or complaints should be directed to the Parliamentary Librarian. Parliamentary Library staff are available to discuss the contents of publications with Senators and Members and their staff. To access this service, clients may contact the author or the Library’s Central Enquiry Point for referral.

Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2500.

Notes

[←1]

.    Explanatory Memorandum, Treasury Laws Amendment (Tax Concession for Australian Medical Innovations) Bill 2022, p. 4.

[←2]

.    Explanatory Memorandum, Treasury Laws Amendment (Tax Concession for Australian Medical Innovations) Bill 2022, p. 1.

[←3]

.    Gary Guenther, Patent Boxes: a Primer, (Congressional Research Service: Washington, May 2017), p. 2.

[←4]

.    Australian Government, Budget Measures: Budget Paper No. 2: 2021–22, p. 23.

[←5]

.    Australian Government, 2021-22 Budget’s Tax Factsheet: Tax Incentives to Support the Recovery, p. 3.

[←6]

.    Organisation for Economic Co-operation and Development (OECD), Harmful Tax Practices - 2018 Progress Report on Preferential Regimes: Inclusive Framework on BEPS: Action 5, (OECD Publishing: Paris, January 2019), pp. 44–46.

[←7]

.    Helen Miller, ‘EU Commission labels UK Patent Box harmful tax competition’, Institute for Fiscal Studies, 18 October 2013.

[←8]

.    OECD, Harmful Tax Practices, p. 14.

[←9]

.    OECD, ‘BEPS Actions’, n.d.

[←10]

.    Australian Government, Tax Incentives, p. 3.

[←11]

.    Treasury, Patent Box: Discussion Paper on Policy Design, (Treasury: Canberra, July 2021).

[←12]

.    Research Australia, Submission to the Treasury, Consultation for Patent Box, 16 August 2021, p. 2.

[←13]

.    Grant Thornton, Submission to the Treasury, Consultation for Patent Box, 16 August 2021, p. 2.

[←14]

.    Elke Asen, ‘Patent Box Regimes in Europe’, Tax Foundation (blog), 9 September 2021.

[←15]

.    Science and Technology Australia, Submission to the Treasury, Consultation for Patent Box, 16 August 2021, p. 3.

[←16]

.    Science and Technology Australia, Submission to the Treasury, p. 3.

[←17]

.    Science and Technology Australia, p. 3.

[←18]

.    Gaetan de Rassenfosse, Patent Box Policies, (Canberra: Department of Industry, Innovation and Science, 2015).

[←19]

.    Rassenfosse, Patent Box Policies, p. 25.

[←20]

.    Rassenfosse, p. 24.

[←21]

.    Joint Select Committee on Trade and Investment Growth, Inquiry into Australia’s Future in Research and Innovation, (Canberra: The Senate, 2016), p. 66.

[←22]

.    AusBiotech, Response to the Patent Box Policies report, 19 November 2021, p. 1.

[←23]

.    Barry Gardiner, Oral Answers to Questions, the United Kingdom House of Commons, Debates, 20 July 2010, p. 178.

[←24]

.    Annette Alstadsæter, Salvador Barrios, Gaetan Nicodeme, Agnieszka Maria Skonieczna, Antonio Vezzani , ‘Patent Boxes Design, Patents Location, and Local R&D’, Economic Policy Journal 33, no. 93 (February 2018): pp. 131–177.

[←25]

.    ‘Does Cutting Taxes Boost the Economy and Lead to More Taxes?’, Tax Justice Network (TJN), n. d.

[←26]

.    The Laffer curve is named after economist Arthur Laffer, who described an economic phenomenon whereby reducing tax rates beyond a certain point would lead to an increase in the overall tax yield.

[←27]

.    Institute of Public Accountants (IPA), Submission to the Treasury, 2020-21 Pre-Budget Submissions, August 2020, p. 35.

[←28]

.    IPA, Submission to the Treasury, pp. 35–36.

[←29]

.    Explanatory Memorandum, Treasury Laws Amendment (Tax Concession for Australian Medical Innovations) Bill 2022, pp. 22–23.

[←30]

.    Science and Technology Australia, Submission to the Treasury, Consultation for Patent Box, 16 August 2021, p. 2.

[←31]

.    Yolanda Redrup, ‘Tax Breaks Tipped to Trigger Innovation Boom’, Australian Financial Review, 12 May 2021.

[←32]

.    ‘How the Proposed Patent Box Scheme could Benefit Australian Industry’, Griffith Hack, n.d.

[←33]

.    Josh Frydenberg (Treasurer), Budget Speech 2021–22.

[←34]

.    Senate Standing Committee for the Scrutiny of Bills, Index of bills considered by the committee, 1, 2022, 4 February 2022.

[←35]

.    Kim Carr, The Patent Box: Not an Innovative Idea, opinion piece, 26 May 2021.

[←36]

.    Medical Technology Association of Australia (MTAA), ‘MTAA Welcomes Patent Box Legislation’, media release, 11 February 2022.

[←37]

.    Medicine Australia, ‘Patent box Legislation to Promote Australian Innovation’, media release, 11 February 2022.

[←38]

.    ‘Patent Box – Joining the Race to the Bottom’, The Australia Institute, 13 May 2021.

[←39]

.    Isaac Gross, ‘The Treasurer says his “Patent Box” will boost Innovation. The Evidence says it won’t’, The Conversation, 17 May 2021.

[←40]

.    Tax Justice Network Australia, Submission to the Treasury, Consultation for Patent Box, 16 August 2021, p. 1.

[←41]

.    Explanatory Memorandum, Treasury Laws Amendment (Tax Concession for Australian Medical Innovations) Bill 2022, p. 1.

[←42]

.    Explanatory Memorandum, p. 1.

[←43]

.    The Statement of Compatibility with Human Rights can be found at pages 19–20 of the Explanatory Memorandum to the Bill.

[←44]

.    Parliamentary Joint Committee on Human Rights, Index of bills considered by the committee, 9 February 2022.

[←45]

.    Explanatory Memorandum, p. 5.

[←46]

.    Treasury, Patent Box, p. 2.

[←47]

.    ‘Eligible R&D Entities’, Australian Taxation Office (ATO), 16 June 2021. Individuals, corporate limited partnerships, and trusts (except for public trading trusts with a corporate trustee) cannot be eligible R&D entities as per section 355–35 of the ITAA 1997.

[←48]

.    ‘Working out your Residency’, ATO, 17 December 2021.

[←49]

.    Explanatory Memorandum, p. 8.

[←50]

.    Explanatory Memorandum, p. 8.

[←51]

.    ‘Patent basics’, IP Australia, 12 March 2016.

[←52]

.    ‘Types of licences’, IP Australia.

[←53]

.    Proposed section 357–20 of the ITAA 1997, at item 1 of the Bill. The ARTG is a database of therapeutic products overseen by the Australian Government. Goods like medications or medical devices must be added to the ARTG before they are allowed to be legally distributed in the country.

[←54]

.    Proposed paragraph 357–15(1)(a) of the ITAA 1997, at item 1 of the Bill.

[←55]

.    Proposed section 357–1 of the Income Tax (Transitional Provisions) Act 1997, at item 5 of the Bill.

Baker McKenzie, a multinational law firm, said it welcomes the news that the scope of the patent box will include patents granted or issued after 11 May 2021, not just those patents applied for after 11 May 2021. The firm welcomes this policy change because it recognises that ‘the patent lifecycle involves long lead times from application to ultimate grant of a patent’.

[←56]

.    Proposed section 357–1 of the Income Tax (Transitional Provisions) Act 1997, at item 5 of the Bill.

[←57]

.    Details of the ‘nexus’ approach is discussed below.

[←58]

.    Treasury, Patent Box, p. 3.

[←59]

.    CSL, Submission to the Treasury, Consultation for Patent Box, 16 August 2021, p. 2.

[←60]

.    World Intellectual Property Organization (WIPO), World Intellectual Property Indicators 2021, (Geneva: WIPO, 2021), p. 7.

[←61]

.    WIPO, World Intellectual Property Indicators 2021, p. 7.

[←62]

.    IP Australia, Australian Intellectual Property Report 2020, (Canberra: IP Australia, 2020), p. 7.

[←63]

.    IP Australia, Australian Intellectual Property Report 2020, p. 11.

[←64]

.    IP Australia, Australian Intellectual Property Report 2020, p. 15.

[←65]

.    Explanatory Memorandum, p. 6, proposed section 357–10 of the ITAA 1997, at item 1 of the Bill.

[←66]

.    Explanatory Memorandum, pp. 6–7, proposed subsections 357–10(2) and (4) of the ITAA 1997.

[←67]

.    Explanatory Memorandum, p. 6, proposed section 357–35 of the ITAA 1997, at item 1 of the Bill; ‘Australian Patent Box: Bill Reveals New Tax Regime to Promote Home-Grown Biotech and Medical Innovation’, King & Wood Mallesons (KWM), 15 February 2022.

[←68]

.    Proposed section 357–25 of the ITAA 1997, at item 1 of the Bill, Explanatory Memorandum, p. 9.

[←69]

.    Explanatory Memorandum, p. 10; proposed subsections 357–25(3) and (4). Assessable income is a taxpayer’s ‘ordinary income’ and ‘statutory income’, see ATO website; Income Tax Assessment Act 1997, subsection 995–1(1), and 6–1(1).

[←70]

.    ‘Australia: Patent Box Legislation Introduced to Parliament’, Baker McKenzie; Explanatory Memorandum, paras 1.64–1.65 and example 1.1 at 12–13.

[←71]

.    Explanatory Memorandum, p. 9; ‘Australia: Patent box legislation introduced to parliament’, Baker McKenzie.

[←72]

.    Explanatory Memorandum, p. 9.

[←73]

.    Proposed sections 357–15 and 357–20 of the ITAA 1997, at item 1 of the Bill and proposed section 357–1 of the Income Tax (Transitional Provisions) Act 1997, at item 5 of the Bill.     The ARTG is a database of therapeutic products overseen by the Australian Government. Goods like medications or medical devices must be added to the ARTG before they are allowed to be legally distributed in the country.

[←74]

.    Proposed subsections 357–25(1) and (6) of the ITAA 1997, at item 1 of the Bill; ITAA 1997 sections 815–135 and 815-235; Explanatory Memorandum, p. 12.

[←75]

.    Explanatory Memorandum, p. 12.

[←76]

.    Explanatory Memorandum, pp. 12–13.

[←77]

.    Explanatory Memorandum, p. 2.

[←78]

.    Explanatory Memorandum, p. 49.

[←79]

.    ‘Transfer Pricing’, Investopedia, 19 August 2021.

[←80]

.    ‘The Arm's Length Principle and Comparability’, ATO, 1 February 2021.

[←81]

.    OECD, OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations 2022, (Paris: OECD, 2022), p. 14.

[←82]

.    Explanatory Memorandum, p. 5.

[←83]

.    ‘Australia: Patent Box legislation’, Baker McKenzie.

[←84]

.    ‘Australian Patent Box’, KWM.

[←85]

.    OECD, Action 5: Agreement on Modified Nexus Approach for IP Regimes, (Paris: OECD Publishing, 2015), p.5.

[←86]

.    ‘Explanatory paper Agreement on Modified Nexus Approach for IP Regimes’, OECD, n.d.

[←87]

.    The OECD ‘modified nexus approach’ updated some aspects of the original ‘nexus approach’, for instance the ‘modified nexus approach’ allows for countries to provide an up-lift on qualifying expenditure, up to 30 per cent. For the purpose of this Bill, the term ‘nexus approach’ is used interchangeably with ‘modified nexus approach’ because Australia’s patent box assumes the latest guidance from the OECD.

[←88]

.    OECD, Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, (Paris: OECD, September 2014), pp. 29–30.

[←89]

.    OECD, Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, pp. 29–30.

[←90]

.    OECD, Harmful Tax Practices - 2018 Progress Report on Preferential Regimes, (Paris: OECD, January 2019), pp. 20–21.

[←91]

.    Elke Asen, ‘How Patent Boxes Impact Business Decisions’, Tax Foundation (blog), 9 September 2021.

[←92]

.    Explanatory Memorandum, p. 4.

[←93]

.    Explanatory Memorandum, p. 16.

[←94]

.    Explanatory Memorandum, pp. 14–15; ‘Australia Introduces Bill on 17 Per Cent Patent Box for Medical and Biotech Technologies’, Ernst and Young (EY), 11 February 2022.

[←95]

.    ‘Australia Introduces Bill’, EY, 11 February 2022.

[←96]

.    Explanatory Memorandum, p. 15.

[←97]

.    ‘An update on the Australian Patent Box and What You Need to do Next’, Allens, 5 August 2021.

[←98]

.    ‘Australia: Patent Box legislation’, Baker McKenzie.

[←99]

.    Explanatory Memorandum, p. 9, proposed subsections 357–25(1) and (7) of the ITAA 1997, at item 1 of the Bill.

[←100]

.    Explanatory Memorandum, p. 17.

[←101]

.    Ronald Mizen, ‘Backflip on R&D gives industry $2b boost’, Australian Financial Review (online), 6 October 2021.

[←102]

.    Stuart Robert (Minister for Education and Youth), Action Plan to supercharge research commercialisation, media release, 2 February 2022.