ZWBX and Commissioner of Taxation (Taxation)

This matter concerned an application for review of a taxation objection decision. The applicant sought to claim early stage investor (ESI) tax offsets totalling $39,705 for the income year ended 30 June 2017. The Commissioner disallowed the objection, finding the applicant was not eligible for the offsets. The dispute centred on whether the applicant's holding company, Holding Co, qualified as an early stage innovation company (ESIC) for the purposes of the relevant legislation.

The primary legal issue before the Tribunal was whether the activities of separate legal entities within a corporate group could be aggregated and considered as the activities of a single holding company for the purposes of satisfying the innovation test under section 360-40(1)(e) of the *Income Tax Assessment Act 1997* (Cth). The applicant contended that the activities of its wholly-owned subsidiaries, IP Co and Trading Co, should be attributed to Holding Co to demonstrate that Holding Co was developing and undertaking business activities related to scaling, broader markets, and competitive advantage.

The Tribunal reasoned that while the applicant's holding company, Holding Co, satisfied the preliminary requirements for an ESIC under sections 360-40(1)(a) to (d) of the *Income Tax Assessment Act 1997*, it failed to meet the innovation test under section 360-40(1)(e). The Tribunal found that Holding Co, as a separate legal entity, did not itself hold an interest in the software, develop the software, or undertake the specified business activities. The Tribunal rejected the applicant's submission that the activities of its subsidiaries could be attributed to Holding Co, noting the absence of any agency, partnership, or joint venture agreements between the distinct legal entities. Consequently, the Tribunal concluded that Holding Co was not an ESIC.

The Tribunal found that the applicant had not discharged the onus of proving that the amended assessments for the income year ending 30 June 2017 were excessive or incorrect. Accordingly, the reviewable objection decision was affirmed.