Private ruling: Early-stage innovation company
Date of advice: 25 May 2026
Published: 10 August 2026
Ruling period: 1 July 20YY to 30 June 20YY

Ruling: Q1: Does Company A qualify as an ESIC? | A1: Yes.

Relevant facts and circumstances: 1. Company A was incorporated in Australia on (DATE). 2. For each of the 20YY and 20YY income years, Company A (including its 100% subsidiaries, if it had any) didn't: • earn assessable income of more than $X, or • incur expenses of more than $X. 3. Company A (including its 100% subsidiaries, if it had any), didn't (and won't) incur total expenses of more than $X across the three-year periods covering: • the 20YY-20YY income years, and • the 20YY-20YY income years. 4. Company A's shares weren't listed on a stock exchange (in Australia or elsewhere) during the ruling period. 5. Company A is developing a product with certain technical characteristics, targeted at Market B. 6. Company A gave us supporting documents and explanations relevant to its product. We include the full contents of these documents and explanations in the facts and circumstances of this ruling. Assumption There will be no material changes to Company A's activities before the end of the 2026 income year.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 360-40

Reasons for decision: Summary: Does Company A qualify as an ESIC? Yes. | Detailed Reasoning - Explanation: 7. Subsection 360-40(1) lists the conditions to qualify as an ESIC. We list and apply them to Company A in Tables 1 and 2. Company A meets these conditions for the reasons given in those tables. | Detailed Reasoning - Applied to Company A: Paragraph (a): the company must meet any of three tests about incorporation or business registration in paragraph (a). One of those tests is that the company was: (i) incorporated in Australia within the last 6 income years (the latest being the current year), and (ii) across the last 3 of those income years it and its 100% subsidiaries incurred total expenses of $1 million or less. Met. Company A was incorporated in Australia during the XXXX income year. This was within the last 6 income years for the ruling period (which covers the 2025 and 2026 income years). Company A's total expenses didn't (or won't) exceed $1 million across the last 3 years for either income year of the ruling period. (That is, 2023-2025 for 2025, and 2024-2026 for 2026.) Paragraph (b): the company and its 100% subsidiaries incurred total expenses of $1 million or less in the income year before the current year. Met. Company A's expenses didn't exceed $1 million in the income year before the relevant 'current year'. (That is, 2024 for 2025, and 2025 for 2026.) Paragraph (c): the company and its 100% subsidiaries had a total assessable income of $200,000 or less in the income year before the current year. Met. Company A's assessable income didn't exceed $200,000 in the income year before the relevant current year. Paragraph (d): at the test time, none of the company's equity interests are listed for quotation in the official list of any stock exchange in Australia or a foreign country. Met. Company A's shares aren't listed on a stock exchange. Paragraph (e): the company either has a 100 points under section 360-45, or meets the principles-based test. Met. Company A meets the principles-based test. See Table 2. Paragraph (f): at the test time, the company isn't a foreign company (within the meaning of the Corporations Act 2001 ). Met. Company A is incorporated in Australia and isn't a foreign company. 8. We apply the principles-based test to Company A in Table 2. Having reviewed the application, explanations, and supporting documents, we're satisfied that Company A passes the principles-based test. | Detailed Reasoning - Applied to Company A: (i) the company is genuinely focussed on developing for commercialisation one or more new (or significantly improved) products, processes, services, or (marketing or organisational) methods Met. Company A is developing a product. We're satisfied this product is new or improved for Market B, and that Company A plans to sell the product to that market. (ii) the business relating to those products, processes, services or methods has a high growth potential Met. We accept that Company A's product has the potential for a high degree of growth within the context of the relevant market, noting that Company A aims to sell a moderate number of high-value products to a niche market. (iii) the company can demonstrate that it has the potential to be able to successfully scale that business Met. Company A plans to procure volume discounts from its suppliers once production starts. This may allow it to reduce costs per-product, and increase profits, as it grows. (iv) the company can demonstrate that it has the potential to be able to address a broader than local market, including global markets, through that business Met. We accept that Company A has the potential to address Market B within Australia, and that once established, it may be able to expand to sell in foreign markets. (v) the company can demonstrate that it has the potential to be able to have competitive advantages for that business Met. We accept that Company A has the potential to have competitive advantages because currently no product in Market B (in Australia) has equivalent technical characteristics to Company A's product. 9. Since Company A meets the conditions in subsection 360-40(1), including the principles-based test, it qualifies as an ESIC for the ruling period.

• section 360-40 means section 360-40 of the Income Tax Assessment Act 1997 | • 'ESIC' (Early-stage innovation company) means a company to which subsection 360-40(1) applies | • 'principles-based test' means the conditions listed in subparagraphs 360-40(1)(e)(i) through (v).