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How this will work in practice
Dane is the founder of InstaFilm Pty Ltd, a startup that is developing a new app that allows users to easily edit and share high-definition movies taken with a smartphone. Dane purchases a patent over a new method for compressing data on a mobile phone.
The statutory life of the patent is 20 years but industry analysis provides evidence that the processor will only generate net cash inflows for five years.
Under the current law, the patent must be depreciated over 20 years.
Under the new arrangements Dane can self-assess the patent’s effective life to be five years. This allows Dane to claim a larger tax deduction over a shorter period than he would have been able to under the old arrangements.