Intellectual property originators and spin-off companies - issues for consideration

In recent tax treaty amendments, Australia has reserved the right to tax capital gains derived from alienation of property connected with Australia. The author analyses the impact of that on cross-border investment decisions, in particular, the creation of appropriate business structures for the effective transfer of intellectual property (IP) to spin-off companies for the purposes of IP commercialization. The article focuses on some aspects of the tax position of an Australian IP originator at the main stages of IP commercialization, the consequences of establishing a spin-off entity in Australia and in the United States based on the tax treaty between the two countries and highlights some of the issues that may arise when decisions are made to locate the spin-off entity in Australia or abroad.