[4116] Thin capitalisation [updated]
Title
Multinational tax integrity – strengthening Australia’s interest limitation (thin capitalisation) rules
Purpose
On 8 April 2024, the Treasury Laws Amendment (Making Multinationals Pay Their Fair Share – Integrity and Transparency) Act 2024 (the Act) received Royal Assent.
The ATO is proposing to provide guidance setting out the Commissioner’s views on, and approach to, key aspects of the new thin capitalisation and debt deduction creation rules contained in Schedule 2 of the Act.
Consultation on potential guidance topics, prioritisation and form closed on 30 April 2024. On 10 May 2024, we published a summary of PAG topics, outlining topics raised by stakeholders and how these will be prioritised.
The high-priority topics we intend to resource immediately are:
- restructures in response to the new law
- third party debt test – key concepts, and
- interaction of transfer pricing and the new thin capitalisation rules.
We continue to engage with stakeholders on the high-priority topics to develop specific public advice and guidance products. We encourage stakeholders to provide specific, practical examples that clearly demonstrate issues raised, including reference to the relevant provisions and analysis of their potential application.
Expected completion date
Consultation on potential guidance topics, prioritisation and form closed on 30 April 2024.
See below for expected publication dates of proposed public advice and guidance.
Contact
Stephen Dodshon, Public Groups
Erin Gordon, Tax Counsel Network
For more information, see Matters under consultation.
Title
Final Practical Compliance Guideline
Factors to consider when determining the amount of your inbound cross-border related party financing arrangement – ATO compliance approach
Purpose
The third priority topic is practical guidance in relation to the arm’s length amount of a debt interest for transfer pricing purposes (Subdivision 815B of the Income Tax Assessment Act 1997). This Guideline will focus on broad-based principles for taxpayers to consider in determining and testing the amount of their cross-border related party finance arrangement. It also outlines specific features of financing arrangements and transfer pricing analysis which we would view as being cause for concern.
Expected completion
December 2026
Comments
Draft Practical Compliance Guideline PCG 2025/D2 Factors to consider when determining the amount of your inbound, cross-border related party financing arrangement – ATO compliance approach published on 29 May 2025. Comments period closed on 14 July 2025.
Contact
Nick Trotman, Public Groups
[4168] Royalty characterisation of payments relating to intermediation or distribution arrangements – ATO compliance approach [updated]
Title
Final Practical Compliance Guideline
Royalty characterisation of payments relating to intermediation or distribution arrangements – ATO compliance approach
Purpose
To accompany the view set out in Taxation Ruling TR 2026/2 Income tax: royalties – character of payments in respect of software and intellectual property rights, we have released Draft Practical Compliance Guideline PCG 2026/D4 Royalty characterisation of payments relating to intermediation or distribution arrangements – ATO compliance approach.
This Guideline sets out:
- how we will practically administer the view set out in TR 2026/2
- expanded lower-risk zones where we are unlikely to apply our compliance resources to further review arrangements, and
- indicia of higher-risk arrangements which are likely to be our focus.
We are now seeking comments and submissions in relation to this Guideline, which close on 2 October 2026.
We encourage you to provide feedback during the consultation period, particularly about:
- the criteria underpinning the risk zones
- the residual risk assessment calculation
- issues relating to the practical application of the Guideline
- the usefulness of the examples
- any other aspects you think should be addressed in the final Guideline.
We will be conducting 2 virtual ‘roundtable sessions’ to provide an overview and discuss the key updates to the Guideline. These are scheduled for:
- Wednesday 16 September 2026 at 3:00 pm AEST, and
- Friday 18 September 2026 at 10:00 am AEST.
Should you wish to take part, respond to the email address below by 2:00 pm AEST Friday 11 September 2026 with your preferred session, plus the names and positions of proposed attendees from your organisation.
Expected completion
To be advised
Comments
PCG 2026/D4 published on 4 September 2026. Comments period closes on 2 October 2026. Draft Practical Compliance Guideline PCG 2025/D4 Low-risk payments relating to software arrangements – ATO compliance approach, which published on 6 August 2025, has now been withdrawn.
Contact
IntangiblesArrangements@ato.gov.au
[4210] Transfer pricing consequences under the former transfer pricing regime [new]
Title
Decision impact statement
Decision impact statement on Alcoa of Australia and Commissioner of Taxation [2025] ARTA 482
Purpose
This Decision impact statement outlines the ATO’s response to the Administrative Review Tribunal decision, which concerned the transfer pricing consequences under former Division 13 of the Income Tax Assessment Act 1936 (ITAA 1936) of corrupt dealing that had infected commercial transactions involving sales of alumina to a foreign entity through an intermediary. The Tribunal determined that the dealing was not at arm’s length by reason of steps taken to facilitate bribery of foreign officials. They found that the dealing had not resulted in Alcoa receiving consideration that was less than the consideration that would have been received in an arm’s length dealing. The decision does not represent a departure from established transfer pricing principles relevant to former Division 13 of the ITAA 1936.
Comments
The Decision impact statement on Alcoa of Australia and Commissioner of Taxation [2025] ARTA 482 published on 27 August 2026. Comments period closes on 25 September 2026.
Contact
Danielle Ellershaw, Tax Counsel Network
[4211] Thin capitalisation and the attribution of risk-weighted assets to Australian branches of foreign banks – ATO compliance approach [updated]
Title
Final Practical Compliance Guideline
Thin capitalisation and the attribution of risk-weighted assets to Australian branches of foreign banks – ATO compliance approach
Purpose
A final Guideline is being developed on a thin capitalisation issue which impacts foreign banks that conduct their banking business in Australia through a branch. Relevantly, the Guideline will outline the ATO’s compliance approach to determining the risk-weighted assets attributable to a branch for the purposes of the thin capitalisation rules for inbound banks in section 820-405 of the Income Tax Assessment Act 1997.
This guidance builds upon feedback received on:
- Discussion paper Thin capitalisation – attribution of risk weighted assets to Australian branches of foreign banks, which closed on 31 May 2024, and
- Draft Practical Compliance Guideline PCG 2026/D1 Thin capitalisation and the attribution of risk-weighted assets to Australian branches of foreign banks – ATO compliance approach.
Expected completion
Late 2026
Comments
Draft Practical Compliance Guideline PCG 2026/D1 published on 25 March 2026. Comments period closed on 8 May 2026. Submissions are currently being considered.
Contact
Johanna Tang, Public Groups
[4249] Temporary absences from foreign service under section 23AG – removal of existing administrative approach [updated]
Title
Addendum to Taxation Determination
Taxation Determination TD 2012/8 Income tax: what types of temporary absences from foreign service form part of a continuous period of foreign service under section 23AG of the Income Tax Assessment Act 1936?
Purpose
The existing administrative approach in TD 2012/8 for workers who undertake temporary work-related absences in Australia that are directly related to their foreign service is being removed as it has been found to have no basis in law. This will apply prospectively from the start of the 2026–27 financial year.
Expected completion
Late 2026
Comments
The draft update to TD 2012/8DC published on 10 June 2026. Comments period closed on 17 July 2026.
Contact
Shaun Thomas, Individuals and Intermediaries
Phone: 03 6235 6799
[4262] Stay of taxation dispute [new]
Title
Decision impact statement
Decision impact statement for Oracle Corporation Australia Pty Ltd v Commissioner of Taxation [2025] FCAFC 145
Purpose
This Decision impact statement explains the impact of the Full Federal Court’s decision in Oracle Corporation Australia Pty Ltd v Commissioner of Taxation [2025] FCAFC 145 to allow Oracle’s appeal and stay the Federal Court proceedings.
Comments
The Decision impact statement on Oracle Corporation Australia Pty Ltd v Commissioner of Taxation [2025] FCAFC 145 published on 4 September 2026. Comments period closes on 2 October 2026.
Contact
Melissa Spurge, Tax Counsel Network