Biotech heavyweights Cochlear and CSL are celebrating a long-fought win for concessions that would see income from Australian patents for biotechnology products taxed at a lower rate.
Tuesday’s budget papers unveiled plans for a ‘patent box’, a policy to make income earned from Australian-developed and registered patents taxed at a concessional rate of 17 per cent from July next year, almost half the 30 per cent corporate tax rate.
It’s a measure the biotechnology sector has lobbied for over the past decade, with chief executives including Cochlear’s Dig Howitt arguing that introducing a patent incentives scheme would stop intellectual property developed in Australia from moving offshore to countries with more attractive tax settings.
Mr Howitt welcomed the scheme, saying the flow-on effects of keeping home-grown IP onshore were significant.
Cochlear declined to comment on what the policy will ultimately be worth to its bottom line, given the scheme has not yet been drafted.
CSL’s chief scientific officer Andrew Nash also praised the plan, saying it would help foster advanced manufacturing jobs in Australia.
“It’s an important reform and will help to ensure that the Australia of the future can more easily turn good science into products, professions and local, advanced medical manufacturing capacity. It is an especially significant boost to the policy environment as the country navigates its way out of the pandemic”, said Dr Nash.
Despite the positive news, health stocks fell 0.4 per cent on Wednesday as the broader market lost 0.7 per cent. CSL finished the day flat at $274.25, while Cochlear lost 1.5 per cent to close at $212.98.
Lorraine Chiroiu, the chief executive of lobby group AusBiotech, said the measure would help the viability of local life sciences businesses by offering rewards for bringing products to market.
“This tax incentive will address the gap that leaves our IP vulnerable, retain home-grown IP and
support Australian innovators and manufacturers. It will make the commercialisation of IP and
manufacturing in Australia more genuinely viable for businesses,” she said.
The IP tax incentives come just six months after the government wound back some of its planned reforms to the research and development tax incentive last August – a decision which will see companies including ResMed and Cochlear get more benefits for spending on research.
The patent box policy will only deliver monetary benefits to companies that successfully patent and bring products to market. Many companies in the sector spend decades hoping to get to this point.
Despite this, Ms Chiroiu said the policy would “help bridge the gap to commercialisation” and encourage businesses to make the most out of their locally-produced intellectual property.
Smaller startups such as ASX-listed cancer treatments developer Invion said the policy made the idea of staying in Australia to complete long-term research more attractive.
“The patent box will provide incentives for us to keep our activities in Australia and encourage companies like Invion to continue our long-term program here,” chief executive Thian Chew said.
The government will be consulting with industry before implementing the policy. It predicts the scheme will cost $206 million over the forward estimates.