Edited version of private advice

Authorisation Number: 1052362013465

Date of advice: 17 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 Australian on DD MM YYYY.

2.  The Company is not a member of an income tax consolidated group and does not have any 100% owned subsidiaries.

3.  The directors of the Company are Person X and Person Y.

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

5.  The Company incurred total expenses of less than $1 million in the income year ended DD MM YYYY.

6.  The Company had total assessable income of less than $200,000 in the income year ended DD MM YYYY.

7.  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.

8.  Ordinary class shares in the Company were issued to investors in the income year ended DD MM YYYY.

Product Development

9.  The Company is developing an innovative online platform (product) that is not currently available in Australia.

10.  The Company's product development pathway includes several phases.

11.  Although the product in its initial phase has been introduced to the Australian market, the Company has continued to develop the product, aiming to launch an advanced product in 20XX.

The addressable market

12.  The Company identified its domestic assessable market and potential international markets.

Commercialisation Strategy

13.  From incorporation, all central activities of the Company have been conducted with the intention of developing its innovative product for commercialisation.

14.  The Company has followed its commercialisation strategy to introduce its initial offering to the Australian market, obtain media exposure and establish business partnerships.

15.  The Company has a plan to progress the initial offering to full development and has a development and commercialisation timeline for its new offering.

High Growth Potential

16.  The Company's business plan is to initially service consumers in the Australian market then expand into global markets in future. As the product runs on servers, it can potentially be accessed and used anywhere in the world.

17.  The Company is demonstrating its ability to generate larger revenue and broaden its customer base through effective marketing. For instance, the Company is actively establishing strategic business partnerships which will extend the Company's product offering to be both a product for the consumer, and a product for business.

18.  The financial projections of the Company show high growth potential over the next X years.

Scale up the business

19.  Because the Company's product is XXXX, the Company's growth is not impacted by high overhead costs. The Company will be capable of scaling its business in line with product sales.

20.  Following the introduction of the Company's developed product to the Australian market, the Company plans to move into certain international markets. The Company will be able to scale to service increased customer demand, multiplying its revenue with minimal increase in operating costs.

21.  The Company has an experienced advisory team to support all functions the business requires to scale up.

Broader than Local Market

22.  The Company is developing its product to serve a market that is broader than a local city, area or region.

23.  Users of the Company's initial version of the product are located across Australia.

24.  The Company is actively engaging with potential customers in a broader Australian market.

25.  Being an online platform, the product will be able to be purchased and used by customers anywhere in the world.

26.  The Company has plans to access global markets in future.

Competitive Advantages

27.  The Company demonstrated that its product has unique features and characteristics which sets it apart from its competitors in its addressable market.

28.  The Company has established Business to business (B2B) partnerships. Accordingly, the product's dual offering as a product for the consumer and a product for business gives the Company a competitive advantage.

Intellectual Property

29.  The Company fully owns all the intellectual property (IP) it has developed and will develop in relation to its product.

30.  The Company is looking to register its product for patents or trademarks and apply for international IP rights/protection.

31.  The Company takes operational action to protect its IP from competitors replicating the product.

Information provided:

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

•                     Private ruling application dated DD MM YYY.

•                     Your responses 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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