Edited version of private advice

Authorisation Number: 1052375580113

Date of advice: 28 March 2025

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 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.      ompany was incorporated in Australia on DD MM YYYY.

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

3.      irectors of the Company are Person X and Person Y.

4.      ompany's principal place of business is situated in a state or territory in Australia.

5.      he financial year ending 30 June 20XX, the Company had less than $X in expenditure and had less than $X assessable income.

6.      ompany's equity interests are not listed for quotation on the Australian or any other stock exchange.

7.      ompany intends to issue ordinary class shares to investors in the current financial year.

Product and product development

8.      ompany is developing an innovative digital platform (product) to address inefficiencies and a gap in the assessable market.

9.      roduct will provide a fully configurable software solution that will enable customers to configure all their operational workflows in one software platform.

10.     The Company listed the functional workflows that will be configurable within the product.

11.     The Company described the product's key innovations.

12.     The Company provided details of its product concept, evolution and implementation.

Commercialisation strategy

13.     The technology that the Company is developing will digitise and enhance operational processes in the particular industry.

14.     The Company demonstrated that it is genuinely focused on developing their product for commercialisation.

15.     After implementing the product in their initial target market, the Company will expand their target market.

16.     The Company is building its product to scale, with planning for the future requirements of the particular industry and its stakeholders.

17.     To develop and bring their innovative product to market, the Company is leveraging the expertise of key team members who are experts within their domains and have extensive experience in the particular industry.

18.     The Company's team have determined the potential size and growth of the market. They understand their competitor's strengths and weaknesses and can differentiate their product.

19.     The Company will position its product in the marketplace by providing channel choices for implementing its product depending on customer needs and preferences.

20.     The Company has determined its pricing strategy for their product and forecast revenue for the company.

21.     The Company's commercialisation plan is reflected in its business strategy timeline below which forecasts a saleable product in 20XX.

22.     The Company is undertaking activities and taking tangible steps towards developing and launching their product.

23.     The Company is seeking investors to support their development and commercialisation efforts.

24.     Use of capital raise funds includes allocation to sales and marketing including branding, website design and build, creative and digital campaigns.

High growth potential

25.     The Company is poised for significant growth, driven by its innovative approach to addressing significant gaps in technology available to the particular industry.

26.     The Company detailed its value proposition for future customers of its product.

27.     The Company cited market research findings relevant to their product.

28.     The Company has established pricing examples for their product which will provide predictable budgeting for potential customers and encourage increased usage.

29.     The Company's revenue forecast for the next X years shows high growth potential.

Scale up the business

30.     The Company's senior executives and board members have strong backgrounds in the particular industry. The founders have complementary experience in commercialisation and business growth, innovation and technology.

31.     Other team members have a wealth of experience in software design and development, implementation and support, successful sales experience and extensive global networks in the particular industry which will position the company for rapid sales growth.

32.     The Company will be capable of scaling up its business to fill its high growth potential.

33.     The product's architecture will allow the Company to cost effectively and continuously expand and enhance the platform.

34.     Use of the Company's capital raise funds will include allocation to team expansion, operations costs, and sales and marketing including website design and build, and creative and digital campaigns.

Broader than local market

35.     The Company's product is designed to be applicable in global markets. The products' flexibility and configurability allow it to be adapted to various industries and regions, making it suitable for a wide range of operational needs worldwide.

36.     The extensive global networks of the Company's leaderships team will enable sales penetration outside of Australia.

37.     The Company outlined global trends that will be supported by its product and that will drive growth.

Competitive advantages

38.     The Company's product offers several competitive advantages compared to other offerings in the market.

39.     The Company detailed how it will outperform its competitors because of both differential and cost advantages its product provides.

Intellectual property

40.     The Company is owner of the intellectual property it has developed and will develop in relation to its product.

41.     The Company listed several factors that would make successful replication of their product difficult.

42.     The Company detailed its multi-layered protection strategy that it will implement to maintain its first-mover advantage.

Information provided:

1.      rovided documents containing detailed information in relation to the Company's product including:

•          Private ruling application dated DD MM YYYY.

•          Various documents including pitch deck.

•          Your responses received on DD MM YYYY to our Request for further information.

2.      ve 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