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Low-risk payments relating to software arrangements

We encourage feedback on our draft PCG about low-risk payments relating to software arrangements by 17 September.

Last updated 6 August 2025

We’ve released draft Practical Compliance Guideline (PCG) 2025/D4Low-risk payments relating to software arrangements – ATO compliance approach for consultation. We’re seeking comment from affected taxpayers and tax professionals.

The intent of this draft PCG is to be clear about which arrangements won't attract our attention. That is, when we'll consider there's a low risk that cross-border payments in connection with software have been materially mischaracterised, and we therefore won’t take compliance action.

In response to the feedback that we received on draft Taxation Ruling TR 2024/D1: Income tax: royalties – character of payments in respect of software and intellectual property rights during our public consultation last year, we’ve prioritised this draft guidance in order to:

  • give confidence to in-scope businesses
  • help them avoid unnecessary compliance costs.

This PCG provides guidance about our administrative approach to our view of the law but doesn't set out our view of the law (which is addressed in TR 2024/D1). We’ve deferred the finalisation of TR 2024/D1, pending the High Court’s decision of the appeal from PepsiCo, Inc. v Commissioner of Taxation [2024] FCAFC 86.

We encourage you to provide your feedback during the 6-week consultation period, particularly about:

  • the criteria underpinning the green zone
  • issues relating to the practical application of the PCG for taxpayers
  • the usefulness of the examples and the scenarios
  • any other aspects you consider ought to be addressed in a final PCG.

You can email your comments to IntangiblesArrangements@ato.gov.au by 17 September.

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