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Edited version of private advice
Authorisation Number: 1052312259040
Date of advice: 10 October 2024
Ruling
Subject: ESIC eligibility
Question
Does Company A satisfy the criteria of an Early Stage Innovation Company (ESIC) pursuant to 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:
Year ending DD MM YYYY
The scheme commences on:
DD MM YYYY
All legislative references are to the Income Tax Assessment Act 1997 (ITAA 1997) unless otherwise specified.
Relevant facts and circumstances
The Early Stage Test
1. Company A is a proprietary company incorporated in Australia and registered in the Australian Business Register on DD MM YYYY.
2. Company A has issued ordinary shares to various shareholders since its registration on DD MM YYYY.
3. Company A was incorporated in Australia within the last six income years (the latest being the current year) during which period it did not have any subsidiaries, and across the last three of those years before the current year Company A incurred total expenses of less than less than $1 million.
4. Company A did not have any subsidiaries and generated less than $200,000 in assessable income in the income year ended DD MM YYYY (the year before the current year).
5. Company A's equity interests are not listed for quotation in the official list of any stock exchange, either in Australia or a foreign country.
Further relevant facts and circumstances
6. The Company is developing a product and information that details its development was provided.
7. In rulings for previous periods, Company A qualified as an ESIC at relevant test times. The basis for the decisions for the previous periods was that the company satisfied the principles based test in respect of the 'product' being developed.
8. Since the previous rulings have issued, Company A has continued to develop its 'product'.
Assumptions:
Not applicable.
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
Further issues for you to consider:
Not applicable
Conclusion
Company A meets the eligibility criteria of an ESIC under section 360-40 for the period DD MM YYYY to DD MM YYYY, or the date when the 'product' has been fully developed and is ready for client use, whichever occurs earlier.