Budget 2022: Reduced tax rate for green-friendly tech

The Morrison government will expand tax benefits for newly patented green-friendly inventions to push the nation towards net-zero emissions by 2050.

Budget papers showed climate spending would drop from $2bn in 2022-23 to $1.9bn in 2023-24, $1.5bn in 2024-25 and $1.3bn by 2025-26.

The Morrison government will expand tax benefits for newly patented green-friendly inventions to push the nation towards net-zero emissions by 2050.

Profits generated by patents on emissions-reducing technology will be subject to an effective income tax rate of 17 per cent instead of the corporate rate of 30 per cent for large businesses and 25 per cent for small businesses.

The expanded scheme was rather solitary in a budget light on specific initiatives aimed at reducing the country’s carbon emissions to net zero by 2050.

Budget papers showed climate spending – including funding for the Clean Energy Finance Corporation and the Australian Renewable Energy Agency – would drop from $2bn in 2022-23 to $1.9bn in 2023-24, $1.5bn in 2024-25 and $1.3bn by 2025-26.

In his budget night speech, Josh Frydenberg reiterated the Coalition’s well-worn pledge to lower Australia’s carbon emissions to net zero by 2050 by using technological advancements.

“Australia is on the pathway to net-zero emissions by 2050 and playing its part in responding to the critical global challenge of climate change,” the Treasurer said.

“Technology, not taxes, will get us there.”

The tax benefits for emissions-reducing inventions will be delivered through the government’s expansion of the “patent box”, announced in the 2021-22 budget, which initially was targeted at new patents in the medical and biotechnology sectors.

The scheme will apply for patents granted after budget night and for income years starting on or after July 1 next year.

The patent box legislation is before parliament.

A further $565m has been set aside for investments in “international low-emissions technology partnerships”.

The Coalition has continued to back clean energy technologies, as outlined in its long-term emissions reduction plan.

The budget papers outlined $2.5bn for projects through the country’s carbon offset scheme, the Emissions Reduction Fund, as well as a further $2bn for further abatement through the Climate Solutions Fund.

Establishment of a world-leading hydrogen export industry has been identified as a key outcome and has been backed with $1.5bn in funding.

Mr Frydenberg said alternative energy sources would be needed to bring down emissions.

“Already, Australia has the highest uptake of rooftop solar in the world,” he said. “We are investing in clean hydrogen, carbon capture and storage, batteries and large-scale solar.

“Tonight we make further investments in microgrids to support regional and remote communities that don’t otherwise have access to the grid with small-scale renewable energy projects like solar and wind.”