Private ruling: Early stage innovation
Date of advice: 18 March 2026
Published: 25 May 2026
Ruling period: 1 July 20XX to 30 June 20XX

Ruling: Q1: Does Company A qualify as an ESIC for the 20XX and 20XX income years? | A1: Yes

Relevant facts and circumstances: 1. Company A was incorporated in Australia during the 20XX income year. 2. Company A has no subsidiaries. 3. For the 20XX income year, Company A had total expenses of less than $1,000,000, and less than $200,000 in assessable income. 4. None of Company A's equity interests have been listed on any stock exchange. 5. Company A is developing Product B. Company A has described Product B (and plans for the product) in the private ruling application and several supporting documents. We treat these documents as being fully incorporated in the facts and circumstances of this private ruling. Assumptions • The relevant facts and circumstances described in this ruling will continue unchanged for the income years ending 20XX and 20XX. If these facts and circumstances change, this ruling won't apply. • Company A will have total expenses of less than $1,000,000, and less than $200,000 in assessable income, during the 20XX income year.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 360-40

Reasons for decision: Summary: Does Company A qualify as an ESIC for the 20XX and 20XX income years? Yes | Detailed Reasoning - Explanation: 6. 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 3 income years (the latest being the current year). Met. Company A was incorporated during the 20XX income year (which will be one of the last 3 income years for both the 20XX and 20XX income years). 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 has no subsidiaries, and its expenses were less than $1 million in the 20XX income year (the income year immediately before the current year, 20XX). We've assumed the same will apply in the 20XX income year (for when the current income year is 20XX). 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 has no subsidiaries and earned less than $200,000 assessable income in the 20XX income year (the income year immediately before the current year, 20XX). We've assumed the same will apply in the 20XX income year (for when the current income year is 20XX). 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 has no equity interests listed on a stock exchange, and we've assumed this won't change during the ruling period. Paragraph (e): the company either has 100 points under section 360-45, or meets the principle-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. 7. We apply the principle-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 principle-based test. Table 2: the principle-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 Product B • Product B is a new product in the relevant applicable market • Company A is developing Product B 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 Product B has the potential to grow throughout the relevant applicable market within Australia, 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 can successfully scale the business: Product B 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 Product B has the potential to address a gap in the relevant applicable market within Australia, 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 Company A's Product B has potential differential advantages over competitors in the relevant Australian and overseas applicable markets. 8. 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. 9. 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.

• section 360-40 means section 360-40 of the Income Tax Assessment Act 1997 | • 'ESIC' means a company to which subsection 360-40(1) applies | • 'principle-based test' means the conditions listed in subparagraphs 360-40(1)(e)(i) through (v).