Private ruling: Early stage innovation company
Date of advice: 1 April 2026
Published: 6 July 2026
Ruling period: (part of the 20XX income year)

Ruling: Q1: Does Company A qualify as an ESIC for the ruling period? | A1: Yes

Relevant facts and circumstances: (1) Company A had less than $1 million in expenses, and less than $200,000 assessable income, in the 20XX income year. (2) Company A had less than $1 million in total expenses throughout the 3-year period covering the 20XX, 20XX, and 20XX income years. (3) Company A was incorporated during the last six income years. (4) Company A has no subsidiaries. (5) Company A develops Industry B software called Product C. Product C is a digital product. Product C currently assists Industry B professionals in completing certain professional services. Product C offers a single online package to signed-up subscribers. (6) Company A is building new features to add to the Product C software package. (details omitted for confidentiality reasons) (7) Company A has researched Industry B software in the applicable market and established that no competing products offer equivalent features. • While there are similar Industry B software packages, none integrate Company A's features as part of that all-in-one package. • Similar features may exist elsewhere, but only as stand-alone or 'plug-in' features, rather than an integrated part of an existing Industry B software package.


Reasons for decision: Detailed Reasoning - Answer: Yes | Detailed Reasoning - Explanation: (9) 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. Table 1: ESIC conditions in subsection 360-40(1), applied to Company A | 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 incorporated in Australia within the last 6 income years (the latest being the current year), and across the last 3 of those income years before the current year it, and its 100% subsidiaries (if any) incurred total expenses of $1 million or less. Met. Company A was incorporated during the six-year period ending in the current income year (1 July 2020 to 30 June 2026). Company A's total expenses from 1 July 2022 to 30 June 2025 didn't exceed $1 million. This is the three-income year period ending before the current income year (2026). (Company A has no subsidiaries.) 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 incurred less than $1 million total expenses in the 2025 income year - which is the income year before the current income year (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 had assessable income of less than $200,000 in the 2025 income 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 equity interests aren't listed on any stock exchange. Paragraph (e): the company either has a 100 points under section 360-45, or meets the principles-based test. Met. 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, so it isn't a foreign company. (10) We apply the principles-based test to Company A in Table 2. Having reviewed the application and supporting documents incorporated in the facts and circumstances of this ruling, we're satisfied that Company A passes the principles-based test. Table 2: the principles-based test, applied to Company A. | 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. We're satisfied that: • Company A is genuinely focused on developing a digital software package (Product C) • the Product C digital platform includes features that will be new for the relevant applicable market (because no current software integrates all Product C's features as part of a single all-in-one software package) • Company A is developing that digital platform for commercialisation. (ii) the business relating to those products, processes, services or methods has a high growth potential Met. We're satisfied that Company A's digital software package has the potential to grow throughout the relevant applicable market, and potentially to similar markets overseas. (iii) the company can demonstrate that it has the potential to be able to successfully scale that business Met. We're satisfied that Company A has the potential to successfully scale the business: a digital platform is likely to grow revenue at a faster rate than operating costs. (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're satisfied that Company A's digital platform has the potential to address a gap in the relevant applicable market, and potentially similar markets overseas. (v) the company can demonstrate that it has the potential to be able to have competitive advantages for that business Met. We're satisfied that Product C has potential differential advantages over competitors in the relevant applicable market. While some competitors may offer similar services, none currently offer a complete package that includes all Product C's features. (11) 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. (12) Note that this ruling depends on there being no changes to the facts and circumstances during the ruling period. The ruling won't apply if those facts and circumstances change.