| Disclaimer You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of private advice
Authorisation Number: 1052035172026
Date of advice: 28 February 2023
Ruling
Subject: Early stage innovation company
Question 1
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 income year ending 30 June 20XX?
Answer
Yes.
Question 2
Does the company meet the criteria of an ESIC under subsection 360-40(1) of the ITAA 1997 for the income year ending 30 June 20XX?
Answer
Yes.
This ruling applies for the following period:
Year ending 30 June 20XX
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
The company was established on x.
Documents and submissions in respect of the innovation being developed by the company were provided to the Commissioner. This information forms the basis upon which this ruling is made.
Relevant legislative provisions
Subsection 360-40(1) Income Tax Assessment Act 1997
Subsection 360-45 Income Tax Assessment Act 1997
Reasons for decision
Question 1
In order for a company to be considered as an early stage innovation company to which subsection 360-40(1) applies, the requirements in paragraph 360-40(1)(e) must be met. The provision appears as follows:
'...at the test time, the company has at least 100 points under section 360-45, or:
(i) the company is genuinely focussed on developing for commercialisation one or more new, or significantly improved, products, processes, services or marketing or organisational methods; and
(ii) the business relating to those products, processes, services or methods has a high growth potential; and
(iii) the company can demonstrate that it has the potential to be able to successfully scale that business; and
(iv) the company can demonstrate that it has the potential to be able to address a broader than local market, including global markets, through that business; and
(v) the company can demonstrate that it has the potential to be able to have competitive advantages for that business....'
Each condition is considered separately below, taking into consideration the taxpayer's submissions, the business and the nature of the innovation.
Subparagraph 360-40(1)(e)(i)
The Commissioner considers that this condition is satisfied.
Subparagraph 360-40(1)(e)(ii)
The Commissioner considers that this condition is satisfied.
Subparagraph 360-40(1)(e)(iii)
The Commissioner considers that this condition is satisfied.
Subparagraph 360-40(1)(e)(iv)
The Commissioner considers that this condition is satisfied.
Subparagraph 360-40(1)(e)(v)
The Commissioner considers that this condition is satisfied.
In light of the above considerations, the Commissioner considers that the requirements of subsection 360-40(1)(e) have been met in this case.
Question 2
For the purposes of this question, the relevant test time is a particular time in the 20XX income year.
The Commissioner considers that the requirements of subsection 360-40(1)(e) have been met in the 20XX income year for the same reasons as those expressed in the Reasons for Decision for question 1.