Private ruling: Early stage innovation company eligibility
Date of advice: 2 February 2024
Published: 25 March 2024
Ruling period: DD MM YYYY to DD MM YYYY (first period) | DD MM YYYY to DD MM YYYY (second period)
Date scheme commenced: DD MM YYYY

Ruling: Q1: Does Company X 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 DD MM YYYY to DD MM YYYY? | A1: Yes.

Relevant facts and circumstances: 1. Company X is an Australian proprietary company incorporated in XXX on DD MM YYYY. 2. Company X's directors are Director A and Director B. 3. Company X's registered office and principal place of business is situated at XYZ. 4. Company X has x wholly owned subsidiaries, Company Y and Company Z. Company X is the head entity and acts as the Group holding company. Company X is part of an income tax consolidated group. 5. For the financial year ending DD MM YYYY, Company X and its subsidiaries incurred and earned the following: • Total expenses of $x • Total income of $x 6. For the financial year ending DD MM YYYY, Company X and its subsidiaries incurred and earned the following: • Total expenses of $y • Total income of $y 7. Company X's equity interests are not listed for quotation in the official list of any stock exchange, either in Australia or a foreign country. Product Development 8. Company X is developing technologies to accelerate the discovery of world class commodities and deliver a unique competitive advantage for users of those technologies. 9. Company X has secured the exclusive rights to the paradigm shifting satellite based sub-commodity targeting technology in Australia and Country X. 10. The technology has the potential to completely replace existing scientific techniques in the commodity fields, due to its ability to explore for and identify commodities with increased accuracy, decreased risk, lower cost and zero environmental disturbance. 11. The technologies are new disruptive methodologies that are a faster and more accurate approach compared to traditional scientific methods. One technology can best be described as a new and improved service for companies to adopt when searching for particular commodities. 12. The technological approach is a game changer for commodity exploration as traditional approaches only identify particular structures, not individual elements. As a result, compared to traditional methods, the technological approach significantly improves the ability to identify commodities in the early stages of exploration and improve the risk and reward of subsequent exploration, reduces the exploration time taken to discovery (from years to months) and reduces end-to-end exploration costs (by up to xx%). 13. The technologies are now being offered as a service to relevant companies in Australia and Country X, targeting the existing scientific method and early-stage exploration market. Product Development Stages 14. In the first half of YYYY, Company X raised capital from a group of sophisticated investors. These funds were utilised to undertake a blind trial project over a known commodity resource. This work was undertaken to prove the efficacy of the technology in real world application, identify the limitations and key areas for improvement of the technology and for future market development purposes. 15. This blind trial project was completed in MM YYYY and was successful. This blind trial enabled Company X to undertake early-stage market testing for the commercial deployment of the technology in the second half of YYYY. 16. Following market development discussions with potential customers, in MM YYYY, Company X secured the exclusive rights to the technology in Country X. In MM YYYY, Company X also secured the global rights to the technologies for x major multinational companies that are most interested in deploying the technologies on their projects worldwide. 17. This blind trial project and early-stage market testing completed to date has identified areas for further research and development and improvement of the technology. 18. Company X is now working with Company Z to expand the database of target commodities and develop this minimum viable technological service. 19. Subject to further successful research and development, the new minimum viable technological service is planned to incorporate a single point analysis for some target elements. This program is a sub-set of a full x-stage program with a target cost of under US$xxx. This service offering compares to a full x-stage program that costs approximately US$xxxxx. 20. Company X will need to complete the following work in YYYY: • Secure further equity funding from investors of not less than $xxxx to complete development of the new minimum viable service; • Complete further research and development of the new minimum viable service with Company Z; • Undertake a further blind field trial of this new service on a proven resource to test and identify further process and cost improvements for the technology and new service; • Commence market development of this new service with relevant companies with a focus on expanding the technological database for critical commodities; and • Complete an initial program utilising this new minimum viable service. 21. Company X anticipates that this development work will be completed in the financial year ending DD MM YYYY. If this further equity funding takes longer to secure than expected in YYYY, this development phase of work may be delayed until the financial year ending DD MM YYYY. Commercialisation Strategy 22. Company X plans to commercialise the technology as follows: • deploy the existing technology on projects in Australia and Country X, both for third party clients and on projects owned by Company X. This work will demonstrate the efficacy of the technology and provide valuable "learning by doing" opportunities. • Company X then plans to continuously improve the technologies through ongoing research and development, with a primary focus on improving the database and improving the deployment cost of the technology through the use of AI. 23. These steps will create company-owned intellectual property and a proprietary version of the technique. High Growth Potential 24. Company X's technology has the potential to completely disrupt the global resource market. 25. The global particular services market is projected to grow from $xx billion in YYYY to $xxx billion by YYYY, (Source: Fortune Business Insights). 26. Company X's projections based on discussions with relevant companies to date (including x multinational companies) suggest this new service could achieve the following revenue projections in the first x years of commercial deployment (all in A$): • Financial year ending DD MM YYYY - $xxx. • Financial year ending DD MM YYYY - $xxxx. • Financial year ending DD MM YYYY - $xxxxx. 27. These revenue projections are expected to deliver a xx% gross margin to Company X as well as provide it with a strong competitive advantage with its own strategy in Australia. Scale up the Business 28. Company X has been established by a team of industry experts with experience in building successful companies. 29. Company X's strategy is to deploy and develop the technological approach to assist in the discovery of world class commodities. 30. Company X has secured in excess of $x million in funding from its founders and other related shareholders to pursue its strategy to date. 31. Company X is also in discussion with potential cornerstone investors to provide the further financing to allow Company X to pursue its strategy. 32. The Company X team includes key management personnel with many years of experience. 33. The founders of Company X have previously been involved in raising in excess of $x billion in capital (equity and debt) for start-up businesses in the particular sector and Company X is extremely well positioned to secure the funding required to allow it to pursue its strategy. Broader than Local Market 34. Company X's technology has the potential to completely disrupt the particular global market, which is projected to grow to $xx billion by YYYY (Source: Fortune Business Insights). This market opportunity is significant. 35. Whilst Company X has secured the exclusive rights to the technologies in Australia and Country X only to date, its strategy to continuously improve the technologies through ongoing research and development means that over time its target market will grow into the global market. 36. As an example of this opportunity, Company X has held discussions with a global company regarding the deployment of the technologies on one of its Australian projects. This company has already expressed interest in rolling the technology out to its other projects around the world. 37. Following those discussions, Company X has now secured global rights to the technologies for that customer. 38. Such opportunities to expand the reach of the technology into a broader global market as the business grows and gains wider adoption is clear. Competitive Advantages 39. Company X has recently completed a blind test of the technologies over a particular deposit where the results exceeded expectations. 40. The blind test completed by Company X proving the efficacy of the technology and the unique features of the technologies provide the company with a significant competitive advantage in the scientific market compared to existing competing technologies. 41. Based on this large addressable market and the technology's ability to reduce the time and cost of successful commodity search significantly, Company X believes the technology has the potential to be a disruptive tool for relevant companies, become a significant revenue source for Company X and provide it with a strong competitive advantage for its own strategy. 42. Company X's Product has been identified as having an international addressable market. Information provided 43. You have provided a number of documents containing detailed information in relation to Company X's Product, including: • Private Binding Ruling ('PBR') Application, dated DD MM YYYY • Response to further questions provided 44. We have referred to the relevant information within these documents in applying the relevant tests to your circumstances. 45. Company X issued a number of shares and propose to issue new shares to various investors to assist in funding the continued development and commercialisation of their technologies in the current financial year.

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

Reasons for decision: Summary: All legislative references are to the Income Tax Assessment Act 1997 ('ITAA 1997') unless otherwise stated. Company X meets the eligibility requirements of an ESIC under subsection 360-40(1) for the period DD MM YYYY to DD MM YYYY. | Detailed Reasoning - Qualifying Early Stage Innovation Company: 46. Subsection 360-40(1) outlines the criteria required for a company to qualify as an Early Stage Innovation Company (ESIC) at a particular time in an income year. This time is referred to as the 'test time'. The criteria are based on a series of tests to identify if the company is at an early stage of its development, and it is developing new or significantly improved innovations to generate an economic return. | Detailed Reasoning - 'THE EARLY STAGE TEST': 47. The early stage test requirements are outlined in detail within paragraphs 360-40(1)(a) to (d). | Detailed Reasoning - Incorporation or Registration - paragraph 360-40(1)(a): 48. To meet the requirement in paragraph 360-40(1)(a), at a particular time (the test time) in an income year (the current year) the company must have been either: incorporated in Australia within the last three income years (the latest being the current year); or incorporated in Australia within the last six income years (the latest being the current year), and across the last three of those income years before the current year, the company and any 100% subsidiaries incurred total expenses of $1 million or less; or registered in the Australian Business Register (ABR) within the last three income years (the latest being the current year). 49. The term 'current year' is defined in subsection 360-40(1) with reference to the 'test time'; the 'current year' being the income year in which the company issues shares to the investor. 50. A company that does not meet any of these conditions will not qualify as an ESIC. | Detailed Reasoning - Total expenses - paragraph 360-40(1)(b): 51. To meet the requirement in paragraph 360-40(1)(b), the company and any 100% subsidiaries must have incurred total expenses of $1 million or less in the income year before the current year. | Detailed Reasoning - Assessable income - paragraph 360-40(1)(c): 52. To meet the requirement in paragraph 360-40(1)(c), the company and any 100% subsidiaries must have derived total assessable income of $200,000 or less in the income year before the current year. | Detailed Reasoning - No stock exchange listing - paragraph 360-40(1)(d): 53. To meet the requirement in paragraph 360-40(1)(d), the company must not be listed on any stock exchange in Australia or a foreign country. | Detailed Reasoning - 'INNOVATION TESTS': 54. If the company satisfies the early stage test, the company must also satisfy one of two innovation tests: the objective (100 point) test or the principles-based test. | Detailed Reasoning - '100-POINT TEST' - PARAGRAPH 360-40(1)(e) AND SECTION 360-45: 55. To satisfy the 100-Point test the company must obtain at least 100 points by meeting the innovation criteria in the table within section 360-45. The criteria are tested at a time immediately after the relevant shares are issued. If a company satisfies this test, it does not need to satisfy the principles-based test. | Detailed Reasoning - 'PRINCIPLES-BASED TEST' - SUBPARAGRAPHS 360-40(1)(e)(i) TO (v): 56. To satisfy the principles-based Innovation test, the company must meet five requirements in paragraph 360-40(1)(e). This is tested at a time immediately after the relevant new shares are issued to the investor. 57. The company can demonstrate that it meets each requirement through existing documentation such as a business plan, commercialisation strategy, competition analysis or other company documents. The company must be able to show that tangible steps have been or will be taken in relation to each of the requirements. 58. The five requirements of the principles-based test, as outlined in paragraph 360-40(1)(e) are: i. the company must be genuinely focussed on developing for commercialisation one or more new or significantly improved products, processes, services or marketing or organisational methods ii. the business relating to that innovation must have a high growth potential iii. the company must demonstrate that it has the potential to be able to successfully scale up the business relating to the innovation iv. the company must 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 must demonstrate that it has the potential to be able to have competitive advantages for that business. | Detailed Reasoning - Developing new or significantly improved innovations for commercialisation - subparagraph 360-40(1)(e)(i) ITAA 1997: 59. For the purposes of Subdivision 360-A, the Explanatory Memorandum to the Tax Laws Amendment (Tax Incentives for Innovation) Bill 2016 ('EM') provides the following at paragraph 1.76 in relation to the definition of innovation: "Implicit in the definition of innovation is the requirement that the company is developing a new or significantly improved type of innovation such as a product, process, service, marketing or organisational method. This list of various types of innovations provides flexibility for innovation companies and is adaptable to current and future innovations. The Oslo Manual, published by the Organisation for Economic Co-operation and Development (OECD) provides a description of these different types of innovations..." 60. The innovation being developed by the company must either be new or significantly improved for an applicable addressable market. [1] The company's addressable market is the revenue opportunity or market demand arising from the innovation or the related business. The addressable market must be objective and realistic. 61. Improvements must be significant in nature to meet this requirement. Significant is defined in the online Macquarie Dictionary as " important; of consequence ." Customising existing products or minor changes resulting from software updates, pricing strategies or seasonal changes are examples of improvements that would not be considered significant. 62. The OECD Oslo Manual, in relation to defining innovative services, states at paragraph 161 that "innovations in services can include significant improvements in how they are provided (for example, in terms of their efficiency or speed), the addition of new functions or characteristics to existing services, or the introduction of entirely new services." 63. The company must be genuinely focussed on developing the innovation for a commercial purpose in order to generate economic value and revenue for the company. This requirement draws the distinction between simply having an idea and commercialising an idea. 64. For a company to qualify as an ESIC under the principles based test, the company must be "genuinely focussed on developing for commercialisation" their innovation. That is, the central activities of the company must be truly concentrated on developing their innovation for a commercial purpose. 'Commercialisation' includes a range of activities that involve the implementation or sale of a new or significantly improved innovation that will directly lead to the generation of economic value for the company. | Detailed Reasoning - High growth potential - subparagraph 360-40(1)(e)(ii) ITAA 1997: 65. The company must be able to demonstrate that the business relating to the innovation has a high growth potential within a broad addressable market. This refers to the company's ability to rapidly expand its business. Companies that are limited to supplying local customers will not meet this requirement. | Detailed Reasoning - Scalability - subparagraph 360-40(1)(e)(iii) ITAA 1997: 66. The company must be able to demonstrate that it has the potential to successfully scale up the business relating to the innovation. The company must have operating leverage, whereas it increases its market share or enters into new markets, its existing revenues can be multiplied with a reduced or minimal increase in operating costs. | Detailed Reasoning - Broader than local market - subparagraph 360-40(1)(e)(iv) ITAA 1997: 67. The company must be able to demonstrate that it has the potential to address a market that is broader than a local city, area or region. The company does not need to have a serviceable market at a national, multinational or global scale at the test time. However, it does need to show that the business is capable of addressing a market that is broader than a local market and that the business can be adapted to a broader scale in the future. | Detailed Reasoning - Competitive advantages - subparagraph 360-40(1)(e)(v) ITAA 1997: 68. The company must be able to demonstrate that it has the potential to have competitive advantages, such as a cost or differential advantage over its competitors which are sustainable for the business as it expands. The company can analyse what competitors in the market offer and consider whether the company has a differentiating advantage that would allow it to outperform these competitors. | Detailed Reasoning - Foreign Company test - paragraph 360-40(1)(f): 69. At the test time, the company must not be a foreign company within the meaning of the Corporations Act 2001 The dictionary in section 9 of the Corporations Act 2001 defines a foreign company to mean: (a) a body corporate that is incorporated in an external Territory, or outside Australia and the external Territories, and is not: (i) a corporation sole; or (ii) an exempt public authority; or (b) an unincorporated body that: (i) is formed in an external Territory or outside Australia and the external Territories; and (ii) under the law of its place of formation, may sue or be sued, or may hold property in the name of its secretary or of an officer of the body duly appointed for that purpose; and (iii) does not have its head office or principal place of business in Australia. | Detailed Reasoning - TEST TIME: 70. For the purposes of this ruling, the 'test time' for determining if Company X is a qualifying ESIC, will be upon the issue of qualifying shares on a particular date or dates on or after DD MM YYYY, and on or before DD MM YYYY. Company X issued a number of shares between DD MM YYYY and DD MM YYYY and propose to issue new shares to various investors in the current financial year. | Detailed Reasoning - Current year (first period): 71. Therefore, for the purposes of subsection 360-40(1) ITAA 1997 , the current year will be the year ending DD MM YYYY (the YYYY income year). For clarity, in relation to particular requirements within subsection 360-40(1), the last 3 income years will include the years ending DD MM YYYY, YYYY and YYYY, and the income year before the current year will be the year ending DD MM YYYY (the YYYY income year). | Detailed Reasoning - Current year (second period): 72. Therefore, for the purposes of subsection 360-40(1) ITAA 1997 , the current year will be the year ending DD MM YYYY (the YYYY income year). For clarity, in relation to particular requirements within subsection 360-40(1), the last 3 income years will include the years ending DD MM YYYY, YYYY and YYYY, and the income year before the current year will be the year ending DD MM YYYY (the YYYY income year). | Detailed Reasoning - Incorporation or Registration - paragraph 360-40(1)(a) ITAA 1997: 73. Company X was incorporated in XXX on DD MM YYYY, which is within the 3 income years outlined above, therefore the requirements of subparagraph 360-40(1)(a)(i) are satisfied. | Detailed Reasoning - Total expenses - paragraph 360-40(1)(b) ITAA 1997: 74. In applying the requirements of paragraph 360-40(1)(b), Company X and any of its 100% subsidiaries must have incurred total expenses of $1 million or less in the YYYY and YYYY income years, being the income year before the current year for the two periods in the application. 75. Company X incurred expenses of $x in the YYYY income year. Consequently, paragraph 360-40(1)(b) is satisfied for the YYYY income year. 76. Company X incurred expenses of $xx in the YYYY income year. Consequently, paragraph 360-40(1)(b) is satisfied for the YYYY income year. | Detailed Reasoning - Assessable income - paragraph 360-40(1)(c) ITAA 1997: 77. In applying the requirements of paragraph 360-40(1)(c), Company X and any of its 100% subsidiaries must have derived total assessable income of $200,000 or less in the YYYY and YYYY income years, being the income year before the current year for the two periods in the application. 78. Company X earned assessable income in the amount of $x in the YYYY income year. Consequently, paragraph 360-40(1)(c) is satisfied for the YYYY income year. 79. Company X earned assessable income in the amount of $x in the YYYY income year. Consequently, paragraph 360-40(1)(c) is satisfied for the YYYY income year. | Detailed Reasoning - No Stock Exchange listing - paragraph 360-40(1)(d) ITAA 1997: 80. In applying the requirements of paragraph 360-40(1)(d), Company X must not be listed on any Stock Exchange in Australia or a foreign country at the test time. 81. Company X is not listed on any Stock Exchange in Australia or a foreign country at the test time, so paragraph 360-40(1)(d) is satisfied. | Detailed Reasoning - CONCLUSION FOR EARLY STAGE TEST: 82. Company X satisfies the early stage test for the YYYY and YYYY income years, as each of the requirements within paragraphs 360-40(1)(a) to (d) have been satisfied. | Detailed Reasoning - THE '100 POINT TEST' - PARAGRAPH 360-40(1)(e) AND SECTION 360-45: 83. Company X has not provided sufficient evidence of satisfying the 100-point test under section 360-45 for the year ending DD MM YYYY and YYYY. Company X are electing to seek eligibility by satisfying the principles-based Innovation test under section 360-40(1)(e)(i)-(v), in order to be issued with a Private Binding Ruling. | Detailed Reasoning - Developing new or significantly improved innovations for applicable addressable market - subparagraph 360-40(1)(e)(i) ITAA 1997: 84. In applying the requirements of subparagraph 360-40(1)(e)(i), Company X must be developing an innovation which is either new or significantly improved for an applicable addressable market. 85. Company X is developing technologies to accelerate the discovery of world class commodities and deliver a unique competitive advantage for users of those technologies. 86. Company X has secured the exclusive rights to the paradigm shifting satellite based sub-commodity targeting technology in Australia and Country X. 87. The technology has the potential to completely replace existing scientific techniques in the commodity fields, due to its ability to explore for and identify commodities with increased accuracy, decreased risk, lower cost and zero environmental disturbance. 88. The technologies are new disruptive methodologies that are a faster and more accurate approach compared to traditional scientific methods. One technology can best be described as a new and improved service for companies to adopt when searching for particular commodities. 89. The technological approach is a game changer for commodity exploration as traditional approaches only identify particular structures, not individual elements. As a result, compared to traditional methods, the technological approach significantly improves the ability to identify commodities in the early stages of exploration and improve the risk and reward of subsequent exploration, reduces the exploration time taken to discovery (from years to months) and reduces end-to-end exploration costs (by up to xx%). 90. The technologies are now being offered as a service to relevant companies in Australia and Country X, targeting the existing scientific method and early-stage exploration market. 91. Company X is developing their technologies to address a number of discrete markets and is continuing to develop their technologies. 92. Company X is genuinely focussed on developing their technologies for an applicable addressable market. Genuinely focussed on developing for commercialisation - subparagraph 360-40(1)(e)(i) ITAA 1997 93. In applying the requirements of subparagraph 360-40(1)(e)(i), Company X must be genuinely focussed on developing an innovation for a commercial purpose in order to generate economic value and revenue for the company. 94. In the first half of YYYY, Company X raised capital from a group of sophisticated investors. These funds were utilised to undertake a blind trial project over a known commodity resource. This work was undertaken to prove the efficacy of the technology in real world application, identify the limitations and key areas for improvement of the technology and for future market development purposes. 95. This blind trial project was completed in MM YYYY and was successful. This blind trial enabled Company X to undertake early-stage market testing for the commercial deployment of the technology in the second half of YYYY. 96. Following market development discussions with potential customers, in MM YYYY, Company X secured the exclusive rights to the technology in Country X. In MM YYYY, Company X also secured the global rights to the technologies for x major multinational companies that are most interested in deploying the technologies on their projects worldwide. 97. Company X is now working with Company Z to expand the database of target commodities and develop this minimum viable technological service. 98. Company X will need to complete the following work in YYYY: • Secure further equity funding from investors of not less than $xxxx to complete development of the new minimum viable service; • Complete further research and development of the new minimum viable service with Company Z; • Undertake a further blind field trial of this new service on a proven resource to test and identify further process and cost improvements for the technology and new service; • Commence market development of this new service with relevant companies with a focus on expanding the technological database for critical commodities; and • Complete an initial program utilising this new minimum viable service. 99. Company X anticipates that this development work will be completed in the financial year ending DD MM YYYY. If this further equity funding takes longer to secure than expected in YYYY, this development phase of work may be delayed until the financial year ending DD MM YYYY. 100. Company X is genuinely focussed on developing their technologies for a commercial purpose, so subparagraph 360-40(1)(e)(i) is satisfied for the period DD MM YYYY to DD MM YYYY, or the date when their technologies have been fully developed and are ready for client use, whichever occurs earlier. Once the technologies have been fully developed, Company X will no longer be 'developing' for commercialisation. | Detailed Reasoning - High growth potential - subparagraph 360-40(1)(e)(ii) ITAA 1997: 101. In applying the requirements of subparagraph 360-40(1)(e)(ii), Company X must be able to demonstrate that it has the potential for high growth within a broad addressable market. 102. Company X has provided details to satisfy this requirement. 103. Company X has demonstrated a high growth potential for their technologies, so subparagraph 360-40(1)(e)(ii) is satisfied for the period DD MM YYYY to DD MM YYYY. | Detailed Reasoning - Scalability - subparagraph 360-40(1)(e)(iii) ITAA 1997: 104. In applying the requirements of subparagraph 360-40(1)(e)(iii), Company X must be able to demonstrate that it has the potential to successfully scale up the business. 105. Company X has provided details to satisfy this requirement. 106. This leverage ensures that Company X has the potential to successfully scale up its business, so subparagraph 360-40(1)(e)(iii) is satisfied for the period DD MM YYYY to DD MM YYYY. | Detailed Reasoning - Broader than local market - subparagraph 360-40(1)(e)(iv) ITAA 1997: 107. In applying the requirements of subparagraph 360-40(1)(e)(iv), Company X must be able to demonstrate that it has the potential to be able to address a broader than local market, including global markets. 108. Company X has provided details to satisfy this requirement. 109. Company X has demonstrated that it has the capacity to address a broader than local market, so subparagraph 360-40(1)(e)(iv) is satisfied for the period DD MM YYYY to DD MM YYYY. | Detailed Reasoning - Competitive advantages - subparagraph 360-40(1)(e)(v) ITAA 1997: 110. In applying the requirements of subparagraph 360-40(1)(e)(v), Company X must demonstrate that it has potential to be able to have competitive advantage for that business. 111. Company X has provided details to satisfy this requirement. 112. Company X has demonstrated that it has competitive advantages for its business, so subparagraph 360-40(1)(e)(v) is satisfied for the period DD MM YYYY to DD MM YYYY. | Detailed Reasoning - CONCLUSION FOR PRINCIPLES BASED TEST: Company X satisfies the principles-based Innovation test as it has satisfied the requirements within subparagraphs 360-40(1)(e)(i) to (v) for the period DD MM YYYY to DD MM YYYY, or the date when their technology has been fully developed and is ready for client use, whichever occurs earlier. | Detailed Reasoning - Foreign Company Test - subparagraph 360-40(1)(f) ITAA 1997: 113. As Company X was incorporated in Australia, it is not a Foreign Company and paragraph 360-40(1)(f) is satisfied. | Detailed Reasoning - CONCLUSION: Company X meets the eligibility criteria of an ESIC under section 360-40 for the period DD MM YYYY to DD MM YYYY, or the date when their technologies have been fully developed and are ready for client use, whichever occurs earlier. | Detailed Reasoning - Other references (non ATO view): Explanatory Memorandum to the Tax Laws Amendment (Tax Incentives for Innovation) Bill 2016

Tax incentives for Early Stage Investors | [1] Explanatory Memorandum to the Tax Laws Amendment (Tax Incentives for Innovation) Bill 2016, paragraph 1.79.