Medical and biotech patent box

A Patent Box regime with a low 17% corporate tax rate will boost Australian ownership of medical and biotech patents.

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In a move aimed at matching similar measures introduced overseas, from 1 July 2022 company profits derived from medical and biotech patents will be subject to a low 17% tax rate compared to the corporate tax rate of 25% or 30% (depending on the size of taxpayer).

This measure is designed to encourage companies to undertake R&D and to hold patents in Australia and keep the patents here. However, more details are needed to fully understand whether shareholders of such companies will receive any enduring benefit once profits are paid out via franked dividends.

Emissions reduction

$1.6b will be provided over 10 years from the 2021-2022 year to incentivise private investment in certain emissions reduction technology.

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Working through technology investment agencies like ARENA, CEFC and CER, the Government seeks to incentivise private investment identified in its Technology Investment Roadmap and Low Emissions Technology Statements and other focus areas including regional hydrogen hubs, carbon capture, use and storage technologies, very low-cost soil carbon measurement and new agricultural feed technologies and a high-integrity carbon offset scheme in the Indo-Pacific region.

Tax offset for games developers

A 30% refundable tax offset will incentivise the local digital games development industry.

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From 1 July 2022, eligible games developers will receive a refundable tax offset (a similar format to the R&D tax incentive) for qualifying Australian digital games expenditure. To be eligible, there needs to be a minimum of $500,000 in qualifying expenditure and the maximum tax offset each year is $20m. Games with a gambling element will be ineligible. Further details on eligibility rules will be released after stakeholder consultation.

Artificial Intelligence incentives

Targeted incentives are designed to boost AI capabilities in Australia; however these incentives remain small by international standards.

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Government incentives to support AI development in Australia include:

  • The creation of the National Artificial Intelligence Centre that will drive business adoption of AI technologies ($53.8 million over four years)
  • Encouraging Australian businesses to partner with government to pilot projects for AI‑based solutions to national challenges ($33.7 million over four years)
  • Establishing the Next Generation AI Graduates Program to attract and train AI students ($24.7 million over six years);
  • Using AI to solve regional problems by co-funding up to 36 competitive grants ($12 million over five years)

Other grants and incentives

Several other specific target areas benefit from the Budget announcements.

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Besides the $1.2b digital economy strategy, numerous targeted incentives will create winners in specific areas, including:

  • The establishment of the Boosting the Next Generation of Women in Science, Technology, Engineering and Mathematics (STEM) Program, which offers to co-fund scholarships for women in STEM in partnership with industry (costing $42.4 million over seven years from 2021-22)
  • Increased grant funding available through the Women’s Leadership and Development Program ($38.3 million over five years from 2021-22)