Private ruling: Early stage innovation company
Date of advice: 9 July 2020
Published: September 2020
Ruling period: 30 June 2021
Date scheme commenced: 30 June 2020

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 year ending 30 June 2021? | A1: Yes

Relevant facts and circumstances: Assumptions The company satisfies the requirements of subparagraph 360-40(1)(a), subparagraph 360-40(1)(b), subparagraph 60-40(1)(c), and subparagraph 360-40(1)(d). The company does not meet the requirements of the 100-point innovation test.


Reasons for decision: Summary: In order that a company be considered to be 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.