Private ruling: Early-stage innovation company
Date of advice: 14 April 2026
Published: 29 June 2026
Ruling period: Year ending XX XX XXXX

Ruling: Q1: Will the Company satisfy the early-stage test (i.e. the requirements of paragraphs 360-40(1)(a) to (d) and (f) of the Income Tax Assessment Act 1997)? | A1: Yes | Q2: Will the Company satisfy the principles-based innovation test (i.e. the requirements of subparagraphs 360-40(1)(e)(i) to (v) of the Income Tax Assessment Act 1997 )? | A2: Yes

Relevant facts and circumstances: (1) The Company was incorporated in Australia on XX XX XXXX. (2) The Company's equity interests are not listed on any stock exchange, whether in Australia or internationally. (3) No shares have been issued to investors to date. (4) In the previous income year (being the income year ended XX XX XXXX), the Company's total expenses (including any wholly owned subsidiaries) were below $1,000,000 and its assessable income was below $200,000. (5) The Company is developing and commercialising XXXX. (6) The Company's activities involve the development of XXXX. (7) The innovation is intended to be commercialised through XXXX. (8) The software system is not based on fixed rules or simple configuration of existing tools and requires original design, testing, and refinement to determine how adaptive responses should function in practice. (9) The uncertainties addressed through the development of XXXX relate to technical feasibility and system design, rather than market acceptance.

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

Reasons for decision: Summary: Yes. The Company satisfies the early-stage test because it meets the requirements of paragraphs 360-40(1)(a) to (d) and (f). | Detailed Reasoning - Early-Stage Test: (10) For the income year ended 30 June 2025, the Company satisfies the early-stage requirements in paragraphs 360-40(1)(a) to (d) and (f) because it: • was incorporated in Australia within the last 3 income years; • together with any of its 100% subsidiaries (if any), incurred total expenses of $1 million or less and derived assessable income of $200,000 or less in the income year before the current year; • has not had its equity interests listed for quotation on the official list of any stock exchange, whether in Australia or a foreign country; and • is not a foreign company within the meaning of the Corporations Act 2001 . | Detailed Reasoning - Question 2: Will the Company satisfy the principles-based innovation test (i.e. the requirements of subparagraphs 360-40(1)(e)(i) to (v))? | Summary: Yes. The Company satisfies the principles-based innovation test because it meets the requirements of subparagraphs 360-40(1)(e)(i) to (v). | Detailed Reasoning - Principles-Based Test: (11) To be an ESIC, the Company must also satisfy paragraph 360-40(1)(e), which is satisfied if the Company meets the criteria in subparagraphs 360-40(1)(e)(i) to (v). Alternatively, the Company may satisfy the 100-point test in section 360-45. | Detailed Reasoning - Product Development and Development Stages: (12) Subparagraph 360-40(1)(e)(i) provides that the Company must be genuinely focused on developing, for commercial use, a new or significantly improved product, process, service or method. (13) This requirement is satisfied because the Company is focused on the development of XXXX. The Company's activities involve the development of proprietary software systems and adaptive behavioural logic to support XXXX. | Detailed Reasoning - Commercialisation Strategy: (14) Subparagraph 360-40(1)(e)(i) provides that development must be directed toward commercialisation. (15) This requirement is satisfied because the Company is focused on the development and commercialisation of XXXX. | Detailed Reasoning - High Growth Potential: (16) Subparagraph 360-40(1)(e)(ii) provides that the business relating to the innovation must have high growth potential. (17) This requirement is satisfied because XXXX is intended to address XXXX challenges across multiple sectors, including XXXX. The Company's focus on XXXX provides the potential to grow adoption across multiple organisations, supporting increased user numbers and revenue over time. | Detailed Reasoning - Scale up the Business: (18) Subparagraph 360-40(1)(e)(iii) provides that the business must be capable of scaling. (19) This requirement is satisfied because XXXX is being developed as a XXXX that can be deployed to multiple organisations and user groups. The software allows for additional users and organisations to be onboarded without a proportional increase in development costs. | Detailed Reasoning - Broader than the Local Market: (20) Subparagraph 360-40(1)(e)(iv) provides that the business must be capable of addressing more than a local market. (21) This requirement is satisfied because XXXX is a XXXX that can be delivered remotely and used by organisations in different geographic locations. The issues addressed by the software are not limited to a single local market. | Detailed Reasoning - Competitive Advantages: (22) Subparagraph 360-40(1)(e)(v) provides that the business must have potential competitive advantages. (23) This requirement is satisfied because XXXX incorporates XXXX. The adaptive system design creates a barrier to replication for competitors. | Detailed Reasoning - Conclusion: (24) The Company satisfies subparagraphs 360-40(1)(e)(i) to (v). It is not necessary to consider the 100-point test in section 360-45.

Reasons for decision: All legislative references are to the Income Tax Assessment Act 1997 .