Edited version of private advice

Authorisation Number: 1052264744325

Date of advice: 10 July 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

Relevant facts and circumstances

Background Facts

1.    The Company is an Australian proprietary company incorporated in Australia on DD MM YYYY.

2.    The Company is not part of an income tax consolidated group and is a single company with no subsidiaries.

3.    The Company's Directors are Person A, Person B, Person C and Person D.

4.    The Company's registered office is situated at XXX.

5.    The Company did not earn any income and did not incur any expenses for the financial year ended DD MM YYYY.

6.    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.

7.    The Company is developing its own Intellectual Property.

8.    The Company issued the following shares in MM YYYY

•         Company A: XX ordinary shares of $X each.

•         Company B: XX ordinary shares of $X each.

Product Development

9.    The Company is an innovative organisation and has developed novel technology for the XXX market.

10.  The technology is intended to offer a new solution for its current and future customers.

Commercialisation Strategy

11.  The Company is focused on commercialising its novel and innovative technology. The Company is in the early phases of raising capital and conducting activities to bring its technology to market.

12.  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

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

14.  The financial projections of the Company show the high growth potential.

Scale up the business

15.  The Company's business model is scalable and has focussed on national and international commercialisation during development.

16.  The Company's processing methods allow large scale and low-cost production. As the Company increases its share of the market or enters into new markets its revenues can be multiplied with minimal increase in operating costs.

Broader than Local Market

17.  The Company will focus initially on the Australian and international market.

18.  The market for the Company's product could potentially increase to multinational or global markets.

Competitive Advantages

19.  The Company's product is innovative and has significant cost and differential advantages over conventional systems used in the particular industry.

20.  The Company has undertaken detailed competitor analysis.

21.  The Company has been granted licenses over the patented and other intellectual property (IP) and all new IP will be owned by the Company.

22.  The Company's Product has an international addressable market.

Information provided:

1.    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.

•         Various documents.

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