The Australian government is looking into introducing a scheme to provide tax incentives to companies that exploit Australian innovation in Australia.
By way of background, such schemes, commonly referred to as “Patent Boxes”, have been introduced in many foreign jurisdictions, including recently in the UK, and provide a reduced tax rate (typically between 5% and 15%) on income attributable to patented IP. The schemes have been well received and have proven to be effective at turning local innovation into local commercial realities.
For example, since the inception of the UK Patent Box in April 2013, GlaxoSmithKline has commented that it would open a manufacturing plant there for the first time in 40 years.
While Australia already provides a popular 45% tax deduction on research and development by way of the R&D Tax Incentive, tax experts and industry have commented that there is a need for further tax breaks to help turn that research and development into locally made products and services.
As mentioned above, the proposed Australian Patent Box, called “The Australian Innovation and Manufacturing Incentive” (the “AIM” incentive), is still not a reality and, furthermore, is unlikely to eventuate before the 2015 budget, given the current tough budget talk. Nevertheless, the fact that it is on the government’s agenda can only be a good thing for Australian innovation.