Private ruling: Early stage innovation company eligibility
Date of advice: 19 February 2025
Published: 31 March 2025
Ruling period: 01 July 20XX - 30 June 20XX
Date scheme commenced: 01 July 20XX

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 (ITAA 1997) for the period XX September 20XX to 30 June 20XX? | A1: Yes

Relevant facts and circumstances: 1. The Company was incorporated in Australia on XX Date. 2. The Company has no subsidiaries. 3. The Company did not earn assessable income for the financial year ending XX June 20XX. 4. The Company issued shares in the income year ending XX June 20XX. 5. The Company's shares are not listed for quotation in the official list of any stock exchange, either in Australia or a foreign country. Background 6. The Company is developing an innovative digital product. 7. The key product offerings and underlying technology used in and being developed by the Company is owned by the Company, including the foreground and background intellectual property (IP). Development of a new or significantly improved product and/or service 8. The Company is developing a Platform, that was built with security in mind from the bottom up using modern secure cloud enabled technology. 9. The Platform comprises a multi-tenanted stack with the option to extend to distributed nodes in the future. Developing for commercialisation 10. The idea was a proof of concept (POC) undertaken in 20XX. 11. In the 20XX financial year, The Company built upon the core Platform to implement new features in the application and commenced the design and build of the core components of the Company's Platform. 12. The focus for the innovation in 20XX was mostly about engineering the product and market fit for the Platform. 13. In 20XX the Company will focus on growth and investment in people & processes. 14. The Company will retain the IP and commercialise the innovation they are developing. High growth potential and scalability 15. The innovation has high growth potential and the potential to scale up the business successfully. 16. The Company will evaluate the success of the work through internal technical and functional testing, as well as user testing and demonstrations. 17. The Company has already attracted the attention of major clients in Australia. 18. The Company has current sales pipeline and key strategic partner contracts signed. 19. At the conclusion of the 20XX income year, The Company assembled a solution to provide a platform and application that the market agrees is acceptable. With further work during early 20XX income year, the Company is anticipating initial launch in the first half of 20XX income year. Broader than local market 20. Through extensive global research and consultations with world-class experts in the field, The Company concluded that there are no solutions that can be leveraged nor guide the success of the experiments. 21. The challenge in Australia is replicated in most other economies around the world and the Company is looking to scale out once they have established a base in Australia. The Global Total Addressable Market is estimated to be around $XX. Competitive advantages 22. Part of the Company's competitive advantage is that they are developing a product that is needed in the Australia market. 23. Similar competitors also exist globally but can only provide applications with limited capabilities. 24. With the cost of entering the market, it will be extremely difficult for competitors to enter the market. 25. The Company has assembled a solution to provide a platform and application that the market agrees is acceptable.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subdivision 360-A | Income Tax Assessment Act 1997 section 360-40 | Income Tax Assessment Act 1997 section 360-45


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