Edited version of private advice

Authorisation Number: 1052276236218

Date of advice: 17 July 2024

Ruling

Subject: Early-stage innovation company eligibility

Question

Does Company X 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.    Company X is an Australian proprietary company incorporated in Australia on DD MM YYYY.

2.    Company X has x wholly owned subsidiaries. Company X is the head entity of an income tax consolidated group and acts as the Group holding company.

3.    Company X's Director is Person X.

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

5.    For the financial year ended DD MM YYYY, Company X and its wholly owned subsidiaries earned and incurred the following:

•         total assessable income of $x

•         total expenses of $x.

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

7.    Company X issued preference shares to a number of investors during the financial year ended DD MM YYYY. All the preference shares issued are equity interests in Company X and are not debt interests.

Product Development

8.    Company X is developing a software platform for use in a particular industry (the Product).

9.    The Product addresses an identified gap in the market.

Commercialisation Strategy

10.  Company X is focused on developing the Product for a commercial purpose.

11.  Company X has commenced commercialisation and earned revenue from the Product.

High Growth Potential

12.  Company X has identified the main addressable target market and potential revenue streams.

13.  The financial projections of Company X show the high growth potential.

Scale up the business

14.  Company X has been established by a team of industry experts with experience in building successful companies and extensive global networks.

15.  Company X has considerable scope to scale up its business internationally. Once the initial programming is completed, any subsequent iterations to the platform can be easily implemented which will allow Company X to onboard new users and generate increased revenue with minimal increase in operating costs.

Broader than Local Market

16.  Company X has identified its primary markets in Australia and internationally.

17.  By nature, the Product's assessable market is not constrained by geography and Company X's business can be adapted to a global scale in the future.

Competitive Advantages

18.  Company X conducted extensive analysis of the competition in the current market as part of the development of the Product which concluded that the features and functionalities being developed by Company X are unique and significantly differ from its competitors.

19.  Company X has first mover advantage over its competitors.

20.  Company X is developing its own Intellectual Property.

Information provided:

1.    You have provided documents containing detailed information in relation to Company X's Product, including:

•         Private Binding Ruling (PBR) Application dated DD MM YYYY.

•         Responses to requests for information.

•         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

Income Tax Assessment Act 1997 section 974-20

Income Tax Assessment Act 1997 section 974-75