Agricultural technology patent concession ‘too narrow’

Under the initiative, income generated after July 1, 2023 (from patents lodged after March 29 this year) will be taxed at only 17 per cent, provided the research and development involved in the innovation took place in Australia.

This scheme is already in place for medtech companies, but on Tuesday night was extended to businesses that commercialise patented agricultural and veterinary chemicals listed on various registers, or who commercialise technology with the potential to lower emissions. However, emission reduction innovations would have to fall into the 140 technology areas listed in the Australian Government’s 2020 Technology and Investment Roadmap discussion paper, or its so-called low emissions technology statements from 2021.

Multibillion-dollar companies including Cochlear and CSL had pushed for the introduction of a patent box.

“At a glance, extending the patent box scheme to agtech sounds like a good idea, but for start-ups we’re unlikely to actually see much benefit. The big ticket item is the corporate tax break, which is great if you make a profit, but start-ups reinvest in tech for growth ... so this won’t be relevant to most start-ups,” Mr Wilkins said.

“I think it will benefit businesses that are larger agricultural companies, that make a profit from products quickly.

“I hope that it doesn’t incentivise the reinvention of old tech with some creative accounting, at the expense of new innovation.”

Mr Wilkins, who is a serial agtech entrepreneur and worked on his own ventures before joining Lleaf as CEO, said Lleaf had ongoing R&D projects, so it was possible that in years to come the company could benefit from the patent box.

But, he said the government should consider back-dating the scheme to incorporate patents filed in the last few years.

“Lleaf has some really groundbreaking tech that’s helping vegetable growers increase yield by roughly 20 per cent, but it’s tech we’ve already patented, so it’s not eligible. And even if it was, we’re a start-up raising capital ... [it’s a long journey].”

Globally, more than 20 countries have introduced patent boxes, including the UK, Switzerland, France and Belgium.

George Peppou, co-founder of cell-based meat start-up Vow Food, said it was unclear if food tech start-ups like Vow would be able to access the patent box because there was no clarity from government on which sector companies like his fall into - food, agriculture, manufacturing, or something new.

“From my perspective, I don’t have a strong sense of whether the federal government is wanting to invest and build up a food tech ecosystem or not,” he said.

“As a company that has staff and IP that’s been developed in Australia, I want to build business here ... But it’s unclear if Australia will be the best location for us to scale up and grow.”

If the patent box is extended to cover Vow, Mr Peppou said it would influence their decision to stay in Australia or not.

“Any concessions that allow us to operate here are meaningful,” he said.

The upside

While Mr Wilkins and Mr Peppou were sceptical about the utility of the scheme for their start-ups, chief financial officer of vertical farming business Stacked Farm Joseph Lutvey was excited about the patent box.

“The indoor farming and controlled environment space can only build a sustainable advantage through technology,” he said.

“The patent box is something we’ll utilise in the future. We’re in the process of finalising our first commercial farm ... We’ll be profitable next fiscal year.”

Likewise, co-founder of agtech-focused venture capital fund Tenacious Ventures, Matthew Pryor, was pleased the sector was being recognised for the revenue and profits it generates, “rather than its role simply in making Australian agriculture more efficient”.

He acknowledged that in practice, the patent box only suited a subset of agtech companies and there was a danger the scheme would exclude many innovative businesses.

But he believed it would motivate agtech companies to work harder to file patents, which in turn makes them more attractive acquisition targets thanks to the defensibility of their innovations.

“There’s some language that makes it seem it’s quite biologically biotech, plant-breeding related. It would be disappointing if it was that specific,” he said.

“If you think about where innovation is coming from, a lot of it is at the intersection of digital and biological. It seems like there’s a fair bit that’s still not baked [in].“

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