Edited version of private advice

Authorisation Number: 1052369795924

Date of advice: 8 April 2025

Ruling

Subject: ESIC Eligibility

Question 1

Does Company X (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 commences on:

DD MM YYYY

The Early Stage Test

Company X (the Company) is a proprietary company incorporated in Australia on DD MM YYYY.

The Company has no ultimate holding company and no subsidiaries.

For the financial year ending DD MM YYYY, the Company derived assessable income of less than $200,000 and incurred total expenses of less than $1million.

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.

Background Facts

The Company's director is Individual A, an Australian tax resident.

The Company's registered office is in Australia.

The Company develops and holds intellectual property (IP).

The Company was developing their product for the entire period that this ruling applies to.

The Company is not a foreign company within the meaning of the Corporations Act 2001 (Cth).

Product Development

Company X is developing an AI-driven platform (the Platform). This platform is designed to address a gap in processes within the X and Y industries.

The Company's platform is currently under development.

The Company has provided details about the key innovations of the Platform.

The Company is developing their products to address a number of discrete markets and is continuing to develop their products.

Commercialisation Strategy

Company X is commercialising the Platform.

The Company has outlined its objectives for the commercialisation of the Platform.

High Growth Potential

Company X has identified that it has high growth within its addressable market.

The Company's platform is being developed with a focus on key users in the X and Y sectors.

The Company has identified the Market Opportunity of its platform in its current business plan

Scale up the Business

Company X has identified that it has the potential to be able to scale its business and will exhibit operating leverage as it enters new markets. Based on current projections, upon commercialisation of the technology, revenues will be multiplied year on year with a relatively lower rate of increase of operating costs.

Broader than Local Market

Company X will be capable of addressing a market that is broader than a local market and predicts that the business can be adapted to a broader scale in the future.

Competitive Advantages

Company X has identified its product has competitive advantages.

Information provided

You have provided a number of documents containing detailed information in relation to the Company's technology, including:

•                     Private Binding Ruling (PBR) Application form dated DD MM YYYY with a number of detailed attachments.

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

Conclusion

Company X meets the eligibility criteria of an ESIC under section 360-40 of the Income Tax Assessment Act 1997 (ITAA 1997) for the period DD MM YYYY to DD MM YYYY.

Other references (non ATO view)

Explanatory Memorandum to the Tax Laws Amendment (Tax Incentives for Innovation) Bill 2016