New rules for spreading income on the sale of patents
2006 amendment to the Income Tax Act allows taxable income from the sale of patent rights to be spread evenly over three income years, at the vendor's election.
Section EI 3B of the Income Tax Act 2004
This amendment allows taxable income from the sale of patent rights to be spread evenly over three income years, at the vendor's election.
Patent rights are often sold for non-cash items, such as shares or share options. Section CB 26 of the Income Tax Act 2004 makes gains on sale of patent rights taxable income, but if patent rights are sold for non-cash items, a vendor can have a tax liability without having the cash to pay it. This can create cashflow problems for vendors of patent rights, thus creating a potential barrier to investment in research and technology.
Vendors of patent rights will be able to spread income on sale of patent rights over three years, including the year of sale. Allowing the income spread may help to alleviate the potential cashflow problem, thus helping to reduce the potential barrier to investment in research and technology. The three-year spread is at the taxpayer's election, giving taxpayers greater capacity to plan for the required cashflows.
The amendment applies from the 2007-08 income year.
Other sections in this legislation
| Offshore investment | Tax rules for PIEs | Tax on geothermal wells | Australian superannuation fund exemption | New rules for selecting SSCWT rates | Allowing documents to be removed for inspection | Military and police allowances | New rules for spreading income on the sale of patents | Organisations approved for charitable donee status | Consolidated groups and foreign losses | Assessments by the Commissioner | GST and financial services | GST on fringe benefits | GST grouping rules | Taxation of business environmental expenditure | Family assistance provisions | Rewrite amendments | Tax depreciation treatment of patents | Fringe benefit tax | Depreciation formula | Economic rate of depreciation | Calculating depreciation rates | Election to depreciate | Transitional residents | Death and asset transfers | New GST due date | Limit on refunds and allocations of tax | The imputation system and companies | Reverse takeovers | Changes in GST taxable periods | Miscellaneous technical amendments |