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Edited version of private advice

Authorisation Number: 1052354828792

Date of advice: 18 February 2025

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 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

Relevant facts and circumstances

Background Facts

1.  The Company was incorporated in Australia on DD MM YYYY.

2.  The key Director of the Company is Person X.

3.  The Company is not part of an income tax consolidated group and is a single company with no subsidiaries for the financial year ended 30 June 20XX.

4.  The Company's principal place of business is situated in a state or territory in Australia.

5.  For the financial year ended 30 June 20XX, the Company earned and incurred the following:

•                     Total assessable income of less than $200,000.

•                     Total expenses of less than $1 million.

6.  The Company is the owner of the intellectual property related to its product.

7.  Investor funds have been raised to fund the company.

8.  In the financial year ended 30 June 20XX, ordinary and preference shares in the Company were issued.

9.  All preference shares issued in the year ended 30 June 20XX are full equity interests in the Company. There is no debt component associated with the preference shares.

10.  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.

The company

11.  The Company is a startup software company focussed on servicing participants in a particular industry.

Product development

12.  The Company is developing an innovative digital platform (product) to address inefficiencies and a gap in the assessable market.

13.  The Company's product is a mobile app and web portal designed for customers to improve record keeping and streamline and automate workflows. It is an intuitive and comprehensive solution that digitises administration.

14.  The Company provided details of its commercial objective, product concept and evolution, and research and development undertaken.

High growth potential

15.  Comparison of its product to other examples of tech software available to the particular industry showed the likelihood that the Company could expect high growth potential.

16.  The Company detailed how it has achieved that strong growth potential with expansion of its business and generation of revenue.

Scale up the business

17.  The Company was founded by a team with complementary experience in commercialisation and business growth, innovation and technology.

18.  The Company demonstrated scalability of its business by detailing the means by which growth will be achieved including adding revenue, growing the team, expanding overseas, and securing external venture capital.

Broader than local market

19.  The Company has identified its broader assessable markets in Australia and its international markets.

20.  From inception, the Company has designed its software to be global allowing it to be applicable wherever there is potential.

21.  The Company has established strategic international relationships.

Competitive advantages

22.  The Company launched with a strong and already successful team with background expertise in technology. This experience, extended by the experience brought by early stage investors, positions the Company strongly compared to competitors emerging in the particular Australian tech market.

23.  The Company's innovation is leading to the Company's recognised strength in this area in Australia and is positioning the Company strongly internationally against entrenched and outdated alternatives.

Information provided:

1.    You have provided documents containing detailed information in relation to the Company's product including:

•                     Private ruling application dated DD MM YYYY.

•                     Company financials, pitch deck, share registry extract.

•                     Your responses received on DD MM YYYY to our Request for Information.

2.    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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