Edited version of private advice

Authorisation Number: 1052342396356

Date of advice: 13 December 2024

Ruling

Subject: Early-stage innovation company eligibility

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 period DD MM YYYY to DD MM YYYY?

Answer 1

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 registered on the Australian Business Register within the last three income years.

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

3.              The Company's principal place of business is situated in a state or territory in Australia.

4.              For the financial year ended 30 June 20XX, the Company did not earn any income and did not incur expenses.

5.              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.

6.              The Company will issue new ordinary shares to investors during the financial year ending DD MM YYYY.

Product development

7.              The Company is developing an innovative therapeutic product (product).

8.              The product represents a substantial advancement in particular fields.

9.              The product offers a new therapeutic option for patients and improves the efficacy and safety profiles of existing treatments.

10.          In addition to the product innovation, the company is developing process innovations in relation to the therapeutics industry.

11.          The Company has rights to the background Intellectual Property (IP) and will have full ownership of all newly developed IP.

Commercialisation strategy

12.          The Company is genuinely committed to developing and commercialising its innovative product, aligning with the global shift towards more effective treatment management solutions.

13.          To bring their product to market, the Company is leveraging its team's extensive network and industry expertise, including collaborations with key academic institutions and healthcare professionals.

14.          The Company has a comprehensive sales and marketing strategy which includes direct sales, partnerships, and robust promotional activities, aimed at establishing the product as a leading treatment option.

15.          Currently only XXXX registered with the Therapeutic Goods Association of Australia (TGA) in the same category that the Company intends to commercialise, and are expected to be in low supply in coming years.

16.          The Company provided details of the pathway for commercialisation of their product via the TGA.

17.          Financial projections reflect the Company's dedication to commercial success, with significant sales expected which is indicative of the product's market potential and the company's strategic planning.

High growth potential

18.          The Company's initial market focus is on Australia, with plans to extend its reach internationally.

19.          The Company is strategically positioned to address the escalating healthcare challenge, with a global prevalence expected to rise significantly by 20XX.

20.          The Company is dedicated to broadening patient access and driving therapeutic advancements in the particular high-demand sector.

21.          The current market leader is facing global supply constraints for their similar product due to surging demand. The Company has the capacity to fill this gap, especially in Australia, with its innovative product.

22.          The Company has identified the need for large scale manufacturing and distribution of its product.

23.          In Australia, there are currently only XX registered therapeutics available that are comparable to the Company's product. However, these have only been approved for limited treatment and likely to follow similar trends to America where mass shortages are prevalent.

24.          The Company's product is uniquely designed to address the widespread health issues associated and will ease the strain on the healthcare industry.

25.          The Company is well-equipped to capitalise on the emerging market opportunities and solidify its presence as a leader in the therapeutics industry.

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

Scale up the business

27.          The Company has potential to successfully scale its business, leveraging its experienced team and global presence to meet the current and growing demand for the product.

28.          The Company's leadership and staff bring expertise in product development, regulatory navigation, and international market penetration. With their proven track record of commercialising products in diverse markets in Australia and several other countries, the Company is well-equipped to expand its reach.

29.          The Company's strategic operational model, designed for efficiency and scalability, positions it to increase production in response to the high demand for treatment for the disease.

30.          The global prevalence of the disease is driving a surge in the need for effective medications, and the Company's innovative product is at the forefront of meeting this need.

31.          The Company is committed to advanced manufacturing processes and logistics systems to ensure that it can maintain a steady supply of high-quality medication to markets worldwide.

32.          By continuing to build on its solid foundation of team experience, operational excellence, and global market understanding, the Company is positioned to scale the business successfully and address the urgent demand for groundbreaking treatments.

Broader than local market

33.          The Company has identified its local and broader markets in Australia and its international markets and demonstrated that it has the capacity to address these markets.

Competitive advantages

34.          The Company has a competitive advantage as a prime mover in Australia, commercialising a novel therapeutic that is currently not available in Australia.

35.          The Company is positioned to fulfill the pressing demand for innovative treatments in a market with expected significant growth.

36.          The Company's product offers a new mechanism of action that is anticipated to increase efficacy.

37.          The Company's process innovations are intended to revolutionise the Australian therapeutic commercialisation pathway.

38.          The Company's strategic focus on rigorous research and development, combined with its expertise in navigating complex regulatory environments, will facilitate rapid market entry and provide intellectual property protection.

Information provided:

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

•                Private ruling application dated DD MM YYYY.

•                Supplementary 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