Private ruling: Early-stage innovation company eligibility
Date of advice: 2 May 2025
Published: 7 July 2025
Ruling period: DD MM YYYY to DD MM YYYY
Date scheme commenced: DD MM YYYY

Ruling: Q1: 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? | A1: Yes

Relevant facts and circumstances: Background facts 1. The Company was incorporated in Australia on DD MM YYYY. 2. The Company is not part of an income tax consolidated group and does not have any 100% owned subsidiaries. 3. The Directors of the Company are Person X and Person Y. 4. The Company's principal place of business is situated in a state or territory in Australia. 5. For the financial year ending 30 June 20XX, the Company had less than $1 million in expenditure and had less than $200,000 assessable income. 6. The Company's equity interests are not listed for quotation on the Australian or any other stock exchange. 7. The Company intends to issue ordinary class shares to investors in the current financial year. Product and product development 8. The Company is developing an innovative digital product to address particular inefficiencies and gaps in the assessable market. 9. The Company provided details of how its product will address these inefficiencies. 10. The Company has undertaken their initial scope of work in stages as described. 11. Development and commercialisation of the Company's product will be completed under various phases as detailed. 12. The Company described in detail the product's key innovations. Commercialisation strategy 13. The Company's commercialisation plan is reflected in its project timeline provided. 14. The Company demonstrated that it is genuinely focused on developing its product for commercialisation. 15. Part of the Company's commercialisation strategy is addressing several identified technical challenges involved in developing their product. 16. The Company is building its product to scale, with planning for the future requirements of the particular industry and its stakeholders. 17. The Company's team understand the needs of the particular market and described how their one-stop solution will meet those needs. 18. The Company has determined its pricing strategy for their product and forecast the economic value for the company generated by commercialisation of the product. 19. The technology that the Company is developing will digitise and provide significant improvement to current operational methods used in the particular industry. 20. The Company is undertaking activities and taking tangible steps towards developing and launching their product. 21. After implementing the product in their initial target market in Australia, the Company will extend their target market overseas. 22. The Company is seeking investors to support their development and commercialisation efforts. High growth potential 23. The Company has high growth potential, driven by its innovative technology, experienced founding team, and clear revenue model. 24. The Company's product is the first of its kind developed in Australian and will revolutionise the way the particular market operates. 25. The Company's product is designed to solve the current challenges faced by stakeholders such as inefficiencies, lack of transparency, lost business opportunities, illiquidity. 26. The Company's seeks to address these challenges by providing a digital product that connects various stakeholders. 27. Once fully developed and operational, the Company's product has the potential to be used anywhere in the world and will provide a suite of tools and solutions to enhance the user's experience. 28. The Company will operate under a fee-for-service model. 29. The Company's financial forecast for the next X years shows the increase in revenue for the company generated by the product. 30. By addressing inefficiencies in the current market and delivering significant value to users, the Company further strengthens its growth prospects. Scale up the business 31. The Company has been building its product to scale from day one, with planning for the future requirement of the particular industry and its stakeholders. 32. The Company is currently in the process of selecting partners based on their capacity to facilitate significant scale up and to roll out the product. 33. The Company's executive and advisors are experienced practitioners in their field, from financial, marketing, design and product development, to digital strategy and sustainability. Collectively their histories include: • co-founding and scaling several innovative startups • undertaking numerous capital-raising activities and entrepreneurial ventures • new product development and bringing new products to market • working internationally at management level • establishing global businesses and significant global networks • commercial law 34. The Company has received validation from experts in Australia. 35. The Company has held many meetings with a variety of stakeholders both in Australia and overseas and received positive feedback in relation to the product's innovative technology and prospect of solving many issues currently faced in the target market. Broader than local market 36. The Company's product will have application initially in Australia however it is being specifically developed to be able to serve a global market. 37. The Company will expand its product to targeted countries where the Company sees significant potential due to the large market for such products. 38. The Company has access to clients and prices in certain overseas markets, which is crucial for their growth strategy. 39. The Company is in discussions to partner with local experts in one country and has also been in discussions with potential investors in that country to support their expansion plans. 40. The Company is taking a strategic approach to scaling their innovation globally, adapting to different market conditions and requirements. 41. By targeting a particular section of the market currently managed offline, the Company is addressing a specific gap in the market. This focus on a niche area shows a clear strategy for innovation and market penetration, disruption and growth. 42. Digitising processes will facilitate growth to distant overseas markets. The current reliance on informal communication channels among professionals presents a significant opportunity for disruption. 43. The Company's vision for its product highlights the ambition and scalability of the project. Competitive advantages 44. The Company is uniquely positioned to leverage several competitive advantages that set it apart in the market. 45. One of the primary advantages is the Company's innovative approach to addressing inefficiencies in the particular market. 46. The Company's product is designed to be a global XXXXXX which is a disruptive concept. 47. The advanced features of the product sets it apart from traditional methods and offers significant value to users. 48. The technology and intellectual property behind the Company's product further enhance its competitive edge. 49. The product integrates AI. 50. The Company's deep understanding of the specific overseas markets, combined with established relationships with local experts and stakeholders, creates a significant competitive advantage. 51. This Company's vision, coupled with its focus on a niche market presents a significant opportunity for market disruption and growth that competitors would find challenging to emulate. Intellectual property 52. All intellectual property, including the source code and platform architecture, is owned by the Company and appropriately protected. 53. The Company listed several significant barriers that competitors aiming to replicate their product would face. Information provided: 54. You provided documents containing detailed information in relation to the Company's product including: • Private ruling application dated DD MM YYYY. • Various documents including pitch deck, revenue and expense forecast. • Your responses received on DD MM YYYY to our requests for further information. 55. 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