What's in the 2022-23 Federal Budget for big business?

Following the 2022-23 Federal Budget being handed down on Tuesday, 29 March 2022, leaders of large organisations in Australia should note in particular two items that may affect their business. These are the broadened scope of the concessional tax treatment of what is termed patent box income and the extended operation of the ATO's Tax Avoidance Taskforce.

This article is a curated version of the Weekly Tax Bulletin by the Thomson Reuters Tax News Division.

Scope of concessional tax treatment of patent box income extended

The Government announced the introduction of concessional tax treatment for eligible corporate income associated with new patents in the medical and biotechnology sectors (referred to "patent box" income).

Under legislation currently before Parliament (Treasury Laws Amendment (Tax Concession for Australian Medical Innovations) Bill 2022), such income will be taxed at a concessional rate of 17%, with effect for income years starting on or after 1 July 2022. Eligible income will be taxed at the concessional tax rate to the extent that the R&D of the innovation took place in Australia.

The Government will now extend the patent box income measures to provide concessional tax treatment for corporate taxpayers who:

• commercialise their eligible patents linked to agricultural and veterinary chemical products listed on the Australian Pesticides and Veterinary Medicines Authority's Public Chemicals Registration Information System register, or eligible Plant Breeder's Rights; or
• commercialise their patented technologies which have the potential to lower emissions. Patents relating to low emissions technology, as set out in the 140 technology areas listed in the Government's 2020 Technology and Investment Roadmap Discussion Paper or included as priority technologies in the Government's 2021 and future annual Low Emissions Technology Statements will be within scope, provided the patented technology is considered to reduce emissions.

In both cases, patent box income will be taxed at an effective income tax rate of 17% in relation to rights and patents granted or issued after 29 March 2022 and for income years starting on or after 1 July 2023.

The Government will consult with industry before settling the detailed design of the patent box extension.

Source: Budget Paper No 2 [p 22-23]

ATO's Tax Avoidance Taskforce: extended operation, more funding

The Government will provide $325.0 million in 2023-24 and $327.6 million in 2024-25 to the ATO to extend the operation of the Tax Avoidance Taskforce by 2 years to 30 June 2025.

The Taskforce was established in 2016 to undertake compliance activities targeting multinationals, large public and private groups, trusts and high wealth individuals. It also scrutinises specialist tax advisors and intermediaries that promote tax avoidance schemes and strategies.

This measure is estimated to increase receipts by $2.1 billion, and increase payments by $652.6 million over the forward estimates period.

Source: Budget Paper No 2 [p 29]

This article was orignally published on Thomson Reuters Tax Insight.

For more 2022-23Federal Budget information, see our other April 2022 ClearLaw article, Federal Budget for SMEs: Advising small businesses on skills, training and digital adoption incentives