Private ruling: Early stage innovation company eligibility
Date of advice: 24 June 2024
Published: 26 August 2024
Ruling period: Year ending DD MM YYYY
Date scheme commenced: DD MM YYYY

Ruling: Q1: Does the Company satisfy the conditions to qualify as an early stage innovation company (ESIC) under subsection 360-40(1) of the Income Tax Assessment Act 1997 ( ITAA 1997 ) for the income year ending DD MM YYYY? | A1: Yes.

Relevant facts and circumstances: The Company is an Australian proprietary company incorporated on DD MM YYYY. The Company's sole shareholder and director is Director A. The Company's registered office and principal place of business is situated at XXX. The Company has no subsidiaries. The Company is not a foreign company within the meaning of the Corporations Act 2001 (Cth). For the financial year ending DD MM YYYY, the Company incurred and earned the following: • Total expenses of $XX. • Total income of $XX. 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. At the time of the Ruling, the Company holds a financial instrument but has not issued shares to the investors. Product Development The Company intends to develop a spatial computing platform that is capable of turning XXXX into structured data using a XXXX version. The platform aims to deliver new significant features that could help industrial businesses increase production efficiencies and operational safety. The Company is in negotiations with select companies to conduct pilot programs to test the platform's technical performance in an operating environment. Commercialisation Strategy The Company intends to commercialise the platform by way of direct sales and through channel partnerships. Director A actively participates at trade shows to conduct a live demonstration of the platform. Director A intends to exhibit at upcoming local and international trade shows to address the foreign markets. The Company aims to cover a broad market including the metal manufacturing industry, food production industry, and any other industry that involves human-machine processes where time and motion could be of concern. High Growth Potential The platform intends to cover a broad addressable market specifically large companies operating in manufacturing, construction, mining and any industry that requires logistics solutions. The primary market of the platform are large companies that understand the value of incremental differences at each product step of the industrial workflow, and are financially capable of commissioning the platform's services. Scale up the business Director A's technical expertise and skillset covered the large upfront costs associated with developing and building the platform. It is anticipated that once the market-ready version of the platform is launched, the operating expenses of the Company will be less compared to its potential economic return. The Company will be able to deliver the platform and its services using a Hybrid-Cloud platform without needing significant investments in physical infrastructure (i.e. buildings, plants, etc). Commercial-off-the-shelf hardware will be used to interoperate the platform that is considered to be cost efficient. While the initial plan is to launch the platform in Australia, the Company aims to target markets located overseas. Broader than the local market The platform is designed for worldwide use particularly among industries that require logistic solutions. Competitive advantages The platform will deliver new significant features that are currently unavailable in the global market including: • subproblem management; • procedural recommendation engine; • spatial activity clustering; • spatial knowledge, organisation and interactions; and • teach and learn mode. The Company owns full intellectual property rights to the platform. To ensure the platform is not easily imitable, security measures will be put in place regarding access to the technology. Information provided The Company has provided a number of documents containing detailed information in relation to the platform, including: • Private Binding Ruling application dated DD MM YYYY; and • responses to further questions provided DD MM YYYY, DD MM YYYY and DD MM YYYY respectively. We have referred to the relevant information within these documents in applying the relevant tests to the Company's circumstances. At the time of this Ruling, the Company has received terms of a financial instrument with approximate value of $XX to be issued to its potential investor. The Company proposes to issue new shares to various investors to assist in funding the continued development and commercialisation of the platform.

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