Private ruling: Early stage innovation company eligibility
Date of advice: 27 March 2024
Published: 6 May 2024
Ruling period: DD MM YYYY to DD MM YYYY
Date scheme commenced: DD MM YYYY

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 DD MM YYYY to DD MM YYYY? | A1: Yes.


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 Further issues for you to consider: | Not applicable.


Background Facts: 1. The Company is an Australian proprietary company incorporated in XXX on DD MM YYYY. The Company is not part of an income tax consolidated group. | 2. The Company's directors are Director A, Director B and Director C. | 3. The Company's registered office and principal place of business is situated at XXX. | 4. The Company is a single company with no subsidiaries. The Company was established on DD MM YYYY and commenced operations in MM YYYY. The Company did not incur any expenses in the previous (YYYY) income year. | 5. The Company have two license agreements regarding access to IP. Both agreements provide the company with the rights to use IP and develop its own IP. | 6. For the financial year ending DD MM YYY, the Company did not earn any income and did not incur expenses. For the financial year ending DD MM YYYY, The Company incurred and earned the following: | • Total expenses of AUD$XXX | • Total income of AUD$XXX. | 7. The Company's equity interests are not listed for quotation in the official list of any stock exchange, either in Australia or a foreign country. | 8. The Company issued 1st round investor shares on DD MM YYYY to assist in funding the continued development and commercialisation of their Product. | Product Development: 9. The Company intends to ultimately act as a technology transfer company by sub-licensing patented and patent pending IP and indirectly facilitating the production and sale of XXXX to the general public. | 10. The Company and its leadership team negotiated the terms of intellectual property license agreements. The Company signed formal license agreements which give the Company the rights to further develop and commercialise the technologies, and to directly own improvements made to the licensed intellectual property. | 11. The Company aims to license out its solutions as a catalyst to manufacture. This will lead to enhance commercial negotiations between providers and producers, which maximises the economic return to shareholders and the Australian economy. | Commercialisation Strategy: 12. The Company is solely focused on commercialising its novel and innovative technology. The Company is in the early phases of raising capital and conducting research and development and supporting activities to bring its technology to market. | 13. Further development and testing activities are required on the Product. | 14. The Company is genuinely focused on commercialisation. The Company's scientific and commercialisation teams are fully committed to the translation of its product ideas into reality and have established a business structure and plan to do so. | Market Penetration Strategy Potential: 15. The Company's market penetration strategy will be a three stage process. | 16. Prior to entering the market there is further work to be undertaken by the Company, to be able to meet regulatory requirements. | High Growth Potential: 17. The value proposition of the Company's product addresses a local and international readily addressable market opportunity of approximately $XX based on research conducted by the Company. | 18. The Company's market during the first several years of commercial operation is likely to include those regions/countries that have regulatory frameworks that are defined as easy to navigate. | Scale up the business: 19. The Company's business model is highly scalable, as a technology transfer company forming partnerships/sublicensing to highly equipped and resourced companies while receiving license fees tied with demand for the products. | 20. Prior to entering global markets with products at scale, there is scientific work that needs to be undertaken to be able to meet regulatory requirements, identify and substantiate product claims and then, gain product acceptance in the market as a solution to the market's problems and aspirations. | Broader than Local Market: 21. The Company has identified that the global market is large, continues to grow and currently lacks innovation. The opportunity to develop new products in this market that connect into the growing movement towards its product appears to be significant. | 22. Product differentiation, reputation enhancement and premium pricing strategies could also lead to an increase in global market share through sustainable competitive advantage. | 23. The Company plans to conduct parallel activities with overseas regulators as soon as practical and engagement formalised once regulatory bodies and approvals re-granted. A social licence established, combined with regulatory approval in Australia, should allow international markets to be established. | Competitive Advantages: 24. The Company is an Australian company that will be creating Australian jobs and products powered by Australian scientific innovation, and accordingly eligible for certain grant funding and co-funded opportunities. | 25. The Company is the only company in Australia and globally that is known to be on the path to developing its products. | 26. The Company has been granted exclusive and non-exclusive licenses over the patented, patent pending and other intellectual property to further develop and commercialise that intellectual property. The Company owns all improvements made to the intellectual property. | 27. The Company is confident that being the first business to develop its products it will have significant potential value in the market. | Information provided: 1. You have provided a number of documents containing detailed information in relation to The Company's product, including: | • Private Binding Ruling ('PBR') Application dated DD MM YYYY. | • Responses to further questions provided. | 2. We have referred to the relevant information within these documents in applying the relevant tests to your circumstances.