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Edited version of private advice

Authorisation Number:1052289434940

Date of advice: 15 August 2024

Ruling

Subject: Early stage innovation company eligibility

Question

Does the Company meet the criteria of an Early stage innovation company (ESIC) under subsection 360-40(1) of the Income Tax Assessment Act 1997 ('ITAA 1997') for the period DD MM YYYY to DD MM YYYY?

Answer

Yes.

This ruling applies for the following period:

DD MM YYYY to DD MM YYYY

The scheme commenced on:

DD MM YYYY

Background Facts

1.    The Company is an Australian proprietary company incorporated in Australia on DD MM YYYY. The Company is not part of an income tax consolidated group and is a single company with no subsidiaries.

2.    The Company's equity interests are not listed for quotation in the official list of any stock exchange, either in Australia or a foreign country.

3.    The Company's key founders are Person A and Person B.

4.    The Company's registered office and principal place of business is situated at XXX.

5.    For the financial year ending DD MM YYYY, The Company incurred and earned the following:

Total expenses of AUD$X.

Total income of AUD$X.

6.    The Company is currently assessing the potential for patenting or trademarking any resulting innovations and considering the implications for both domestic and international IP protection.

7.    The Company issued ordinary shares in the Company on DD MM YYYY and DD MM YYYY to assist in funding the continued development and commercialisation of their Product.

Product Development

8.    The Company is developing a carbon removal project in Australia.

9.    The Company has a strong management team and existing partnerships in place.

Commercialisation Strategy

10.  The Company is solely focused on commercialising its novel and innovative technology. The Company is in the early phases of raising capital, conducting research and development, and supporting activities to bring its technology to market.

11.  The Company is genuinely focused on commercialisation. The Company's development and commercialisation team are fully committed to the translation of its product ideas into reality and have established a business structure and plan to do so.

High Growth Potential

12.  The value proposition of the Company's product addresses a local and international readily addressable market opportunity of approximately $X based on research conducted by The Company.

13.  The Company's market during the first several years of commercial operation is likely to include those regions/countries that have regulatory frameworks that are defined as easy to navigate.

Scale up the business.

14.  The Company's business model is scalable and is based upon the building on the innovation and commercial success previously achieved.

15.  Prior to entering global markets, development work needs to be undertaken to meet regulatory requirements and, gain product acceptance in the market as a solution to the market's problems and aspirations.

Broader than Local Market

16.  The Company has identified that the global market is large and continues to grow. The opportunity to develop new products in this market appears to be significant.

17.  Product differentiation and reputation enhancement could possibly lead to an increase in global market share through sustainable competitive advantage.

Competitive Advantages

18.  The Company is an Australian Company that will be creating Australian jobs and products powered by Australian innovation, and accordingly eligible for certain grant funding and co-funded opportunities.

19.  The Company is the only Company in Australia that is known to be on the path to developing this product.

20.  The Company issued ordinary shares in the Company in MM YYYY and MM YYYY.

21.  The Company is confident that being the first business to develop its products, it will have significant potential value in the market.

Information provided:

You have provided a number of documents containing detailed information in relation to The Company's product, including:

Private Binding Ruling ('PBR') Application dated DD MM YYYY and various documents.

We have referred to the relevant information within these documents in applying the relevant tests to your circumstances.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Subdivision 360-A

Income Tax Assessment Act 1997 section 360-15

Income Tax Assessment Act 1997 section 360-40

Income Tax Assessment Act 1997 section 360-45

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