Private ruling: Early stage innovation company
Date of advice: 28 February 2023
Published: 3 April 2023
Ruling period: Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 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 income year ending 30 June 20XX? | A1: Yes. | Q2: Does the company meet the criteria of an ESIC under subsection 360-40(1) of the ITAA 1997 for the income year ending 30 June 20XX? | A2: Yes.

Relevant facts and circumstances: The company was established on x. Documents and submissions in respect of the innovation being developed by the company were provided to the Commissioner. This information forms the basis upon which this ruling is made.

Relevant legislative provisions: Subsection 360-40(1) Income Tax Assessment Act 1997 | Subsection 360-45 Income Tax Assessment Act 1997

Reasons for decision: Summary: In order for a company to be considered as an early stage innovation company to which subsection 360-40(1) applies, the requirements in paragraph 360-40(1)(e) must be met. The provision appears as follows: '...at the test time, the company has at least 100 points under section 360-45 , or: (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; and (ii) the business relating to those products, processes, services or methods has a high growth potential; and (iii) the company can demonstrate that it has the potential to be able to successfully scale that business; and (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; and (v) the company can demonstrate that it has the potential to be able to have competitive advantages for that business....' Each condition is considered separately below, taking into consideration the taxpayer's submissions, the business and the nature of the innovation. | Detailed Reasoning - Subparagraph 360-40(1)(e)(i): The Commissioner considers that this condition is satisfied. | Detailed Reasoning - Subparagraph 360-40(1)(e)(ii): The Commissioner considers that this condition is satisfied. | Detailed Reasoning - Subparagraph 360-40(1)(e)(iii): The Commissioner considers that this condition is satisfied. | Detailed Reasoning - Subparagraph 360-40(1)(e)(iv): The Commissioner considers that this condition is satisfied. | Detailed Reasoning - Subparagraph 360-40(1)(e)(v): The Commissioner considers that this condition is satisfied. In light of the above considerations, the Commissioner considers that the requirements of subsection 360-40(1)(e) have been met in this case. | Detailed Reasoning - Question 2: For the purposes of this question, the relevant test time is a particular time in the 20XX income year. The Commissioner considers that the requirements of subsection 360-40(1)(e) have been met in the 20XX income year for the same reasons as those expressed in the Reasons for Decision for question 1.