About this report
This is our fourth year publishing insights on settlements with public and multinational business, and our third year publishing insights on disputes.
This report outlines our key findings and observations on income tax, petroleum resource rent tax (PRRT) and goods and services tax (GST) disputes for 2025–26. The report covers:
- compliance results
- disputed assessments
- dispute resolution: objections, settlements, litigation and mutual agreement procedures (MAP).
Key highlights
Our compliance activities in respect of public and multinational businesses continue to raise significant liabilities:
- We raised $2.05 billion in total income tax liabilities during 2025–26. This was made up of $1.24 billion in tax liabilities, $352 million in interest and $457 million in penalties.
- We raised around $305 million in total GST liabilities during 2025–26. This was made up of $243 million in tax liabilities, $25 million in interest and $37 million in penalties.
- An additional $2.2 billion was paid voluntarily as a result of ATO compliance actions taken in prior years as well as preventative compliance intervention.
Compliance results are concentrated in a small number of taxpayers:
- Income tax
- 127 taxpayers received a tax and/or penalty assessment during 2025–26.
- 7 taxpayers received amended tax assessments with total liabilities greater than $50 million, raising $842 million in tax liabilities from 7 matters during 2025–26.
- 5 taxpayers received penalty assessments greater than $10 million raising $406 million in penalty liabilities.
- GST
- 225 taxpayers received a tax and/or penalty assessment during 2025–26.
- 11 taxpayers received amended tax assessments greater than $5 million raising $141 million in tax liabilities during 2025–26.
- 5 taxpayers received penalty assessments greater than $1 million raising around $36 million in penalty liabilities during 2025–26.
Despite large business being one of the most compliant sectors, disputes with large business continue:
- Of our current 129 audits, 35 relate to taxpayers in the Top 100 population and 65 relate to taxpayers in the Top 1,000 population. While most audits relate to taxpayers in the Top 100 and Top 1,000 populations, we also undertake audits in the Large Risk and Medium and Emerging populations where our risk-detection activities identify matters requiring further investigation.
Global profit shifting continues to be a major focus in our disputes:
- Around two-thirds of current income tax audits involve behavioural risks relating to international related party dealings and cross-border investments and structures. Commonly, our analysis of these arrangements includes consideration of whether one or more anti-avoidance provisions may apply.
- Transfer pricing and arm’s length conditions continues to attract our attention. We are analysing a greater number of arrangements that involve transfer pricing mischaracterisation and other related risks and issues, such as royalty withholding tax.
- We continue to examine cross-border financing and arrangements where taxpayers seek to structure their affairs to gain access to debt deductions or treaty benefits. We are seeing an increasing number of matters involving debt loading and synthetic equity arrangements. In simple terms, these focus areas involve transactions or arrangements that may produce an inappropriate Australian tax outcome – for example, by shifting profits offshore, increasing deductions, accessing treaty benefits or concessions incorrectly, or applying a tax treatment that does not reflect what occurred in practice. We apply significant resources to review business and asset dissipation, where multiple entry consolidated (MEC) rule exploitation and non-resident tax exemptions risks are scrutinised.
Where appropriate, and consistent with the Commonwealth's model litigant policy, we continue to resolve a number of disputes by way of settlement:
- We settled 30 disputes with public and multinational businesses securing $1.31 billion of tax revenue.
- Our total settlement variance for public and multinational businesses was 42%, which means we secured 58% of the disputed amount that we considered payable under our starting position before settlement.
- The 5-year average variance of settlements with public and multinational groups is 41%. This is consistent with the average variance across all client segments.
Large business compliance
Public and multinational businesses include Australian public companies and foreign-owned entities or multinational groups. The majority of our compliance resources for this sector focus on the large businesses in this population (taxpayers with turnover of $250 million or greater).
Large corporates play an important role in our corporate tax system. Corporate tax is highly concentrated in the largest businesses in Australia, with these businesses paying 67% of company tax. Public and multinational businesses also support the tax compliance of other taxpayers through their impact on confidence in the tax system and, increasingly, the information they provide to facilitate compliance.
Our annual Corporate tax transparency report provides insights into how much income tax is paid by our largest taxpayers.
Since the start of the Tax Avoidance Taskforce in 2016, we have seen improvement in the tax compliance of large corporate groups. Our tax gap analysis shows for 2022–23 that 94.1% of tax is paid on lodgment of returns and improves to 96.3% after our compliance activities. For more information see our Annual tax gap findings.
The tax gap indicates that large business has some of the highest levels of tax compliance of all taxpayer groups.
Australia’s economic characteristics, including its historical reliance on foreign capital to fund investment, comparatively high corporate tax rate, reliance on corporate tax revenue and concentration of that revenue among the largest entities, create an ongoing exposure to profit shifting and other tax risks. Managing these risks requires well-resourced engagement programs with skilled staff, sophisticated data and analytics, and sustained oversight of the largest businesses.
Our programs enable us to identify emerging risks early, provide timely advice and assurance, and undertake targeted actions where concerns remain.
Compliance results
Overview of our programs
We are responsible for ensuring public and multinational businesses (including large business) meet their Australian tax obligations. We do this primarily through the Tax Avoidance Taskforce and specific GST compliance programs. Significant funding from government for these programs ensures businesses are meeting their Australian tax obligations.
Our justified trust programs aim to continually monitor Australia's largest businesses via the Top 100 program and regularly review the tax affairs of the large businesses via our Top 1,000 program. We rely on sophisticated data and analytics programs to detect tax risks across all public and multinational businesses, including those not covered by the justified trust programs (for example, those in the Large Risk or Medium and Emerging populations).
For more information see the Top 100 justified trust program findings report and the Top 1,000 findings report.
When we detect material tax risk, we review further or audit to investigate the tax issues and, if necessary, correct the tax outcome. We also apply penalties in appropriate cases.
Typically, Public Groups has between 100 and 150 audits of public and multinational businesses at any given time. These audits generally involve very complex fact patterns and legal arguments. The time it takes to conclude an audit is dependent on many factors. For example, information gathering can be difficult, particularly when offshore parties are involved. It is not unusual for an audit to take a number of years to conclude.
As at 1 July 2026, there were 129 audits in progress involving 122 different economic groups. Of these, 104 audits involve income tax issues. This is broadly comparable with the 2024–25 period.
The majority of our audits continue to relate to large businesses in the Top 100 and Top 1,000 programs, reflecting our regular engagement with these taxpayers and their significant impact on revenue.
Of the audits on hand, 35 cases relate to 28 economic groups in the Top 100 population and 65 cases relate to 65 economic groups in the Top 1,000 population. We also undertake audits across the Large Risk and Medium and Emerging populations where our risk-detection activities identify matters warranting further investigation.
Since the Tax Avoidance Taskforce started in June 2016, we have raised $29 billion in liabilities from public and multinational businesses (as of 30 June 2026). Around $17.5 billion of this is attributed to the additional funding provided through the Tax Avoidance Taskforce, with the balance primarily attributable to base funding.
Common issues addressed through compliance
Our activities consider a broad range of behaviours and focus areas identified within the public and multinational business three-tier model (3TM) as driving tax performance.
The following tables show the key behaviours, events and areas of focus in our current Public Groups audit program. This is not an exhaustive list. Also, owing to wide ranging differences in business activities, models and structures, not all focus areas will apply for every taxpayer.
|
Events (Tier 2) |
Focus areas (Tier 3) |
|---|---|
|
Transfer pricing and arm’s length conditions |
Financing arrangements Offshore hubs and commodity pricing Transfer pricing mischaracterisation |
|
Intangibles arrangements |
Intangibles migration arrangements (including mischaracterisation of Australian activities connected with intangibles) Characterisation of royalty payments |
|
Events (Tier 2) |
Focus areas (Tier 3) |
|---|---|
|
Debt and capital structures |
Characterisation of debt and equity |
|
Disposal of assets or businesses by foreign residents |
Characterisation of disposals |
|
Structuring through vehicles or arrangements |
Accessing treaty benefits Synthetic equity arrangements |
|
Events (Tier 2) |
Focus areas (Tier 3) |
|---|---|
|
Characterisation of business activities |
Treatment of capital and revenue |
|
Claiming other tax concessions or rates |
Entitlement to section 128F withholding tax exemption Entitlement to research and development (R&D) tax offsets |
|
Treatment and reporting for GST purposes |
Treatment applied to real property transactions and accommodation |
As noted previously, around two-thirds of our income tax audits on hand involve international related party dealings or cross-border investment structures. Our analysis of these arrangements commonly includes considering whether one or more anti-avoidance provisions may apply. This is broadly consistent with last year’s observations.
Transfer pricing and arm’s length conditions continue to attract significant attention.
Financing arrangements and offshore hubs remain a focus, including whether related businesses have priced their dealings as independent parties would be expected to. We are also increasing our focus on transfer pricing mischaracterisation, where the way an arrangement is described may not reflect what is occurring in practice, and intangibles migration arrangements, where valuable intangible assets such as intellectual property are developed in Australia and then the assets (or their returns) are shifted overseas.
In addition, we are also reviewing other related risks and issues, such as royalty withholding tax avoided due to payment mischaracterisation.
We continue to examine cross-border investment structures, including whether funding is correctly treated as debt or equity, the tax treatment of disposals by foreign residents, access to treaty benefits and synthetic equity arrangements. We also examine arrangements involving the movement or disposal of businesses and assets where there may be risks relating to the multiple entry consolidated group rules or exemptions available to foreign residents.
These arrangements concern us where they enable taxpayers to reduce or avoid Australian tax and are inconsistent with their commercial substance. These matters can involve several related risks and may require us to consider the application of more than one part of the tax law.
The remainder of the program focuses on domestic tax positions and structures. The main behavioural risks observed relate to:
- characterisation of business activities, particularly whether certain transactions are capital or revenue in nature
- GST treatment of real property transactions and accommodation
- GST lodgment obligations
- claiming of other tax concessions or rates, such as the section 128F withholding tax exemption and R&D tax offsets.
We regularly review risk-detection approaches to respond to emerging behaviours and new areas of non-compliance. We draw on data and analytics, information reported to us, intelligence from engagements and other sources. We may also choose to investigate a matter even though the matter is not currently reflected in a formal risk model.
Preventative compliance results
When determining the total revenue impact of a particular year, we include the additional tax paid voluntarily as a result of our prior interventions. Common ways this can occur include the following:
- Additional tax paid due to our past compliance actions having a lasting effect. Typically, this will be the additional tax collected in later years due to locking in go-forward outcomes under settlements or the elimination of prior-year tax losses.
- Estimated additional tax paid voluntarily when we have influenced tax outcomes through preventative actions, if there is a clear causal connection with our engagements. This can include influencing the tax outcomes of transactions before lodgment in programs like justified trust, private rulings and advance pricing agreements.
An additional $2.24 billion of income tax and GST was paid voluntarily in 2025–26 as a result of ATO compliance actions taken in prior years as well as preventative compliance intervention. This revenue is on top of additional revenue raised via our audit program or reported as settlement collections.
Post lodgment compliance results
Compliance activities in relation to income tax, GST and PRRT for public and multinational businesses are mainly conducted by the Public Groups business line. However, from time-to-time, other business lines conduct compliance activities on these businesses. The results in this section don't include outcomes from compliance activities undertaken by other business lines.
The results in this report include both positive and negative revenue outcomes arising from compliance activity, including refunds. Prior-year figures have been updated on the same basis to align with the Total Revenue Effects methodology used for broader ATO compliance reporting. As a result, some prior-year figures differ from those published in the previous editions of this report
|
Financial year |
Primary tax |
Interest |
Penalties |
Total liabilities |
|---|---|---|---|---|
|
2026 |
$1.24 billion |
$0.35 billion |
$0.46 billion |
$2.05 billion |
|
2025 |
$2.62 billion |
$0.33 billion |
$1.16 billion |
$4.11 billion |
|
2024 |
$2.52 billion |
$0.10 billion |
$0.14 billion |
$2.76 billion |
|
2023 |
$1.81 billion |
$0.32 billion |
$0.46 billion |
$2.60 billion |
We issued income tax and/or penalty assessments to 127 taxpayers which raised $2.05 billion in total tax liabilities in 2025–26. This represents a decrease of $2.06 billion from 2024–25. The decrease was largely driven by a small number of large amendments finalised in 2024–25.
In relation to income tax liabilities raised for 2025–26:
- 127 taxpayers received amended income tax liability assessments
- 7 taxpayers received amended assessments greater than $50 million, raising tax liabilities of approximately $842 million
Tax liabilities can vary year-on-year due to the variability in the issues and size of assessments. However, we generally expect income tax liabilities will average around $2 billion per year. Emerging issues, evolving business models and one-off events, such as business disposals, continue to produce material income tax adjustments.
Not all amended assessments will attract a penalty under the law. As we typically consider penalties following the conclusion of an audit, some of the penalty assessments raised during the year related to audits concluded in the previous financial year (2024–25). Equally, we are still determining penalties for a number of audit assessments issued in 2025–26.
Penalties decreased by around $710 million from 2024–25, mainly reflecting lower primary tax liabilities raised in 2025–26 and the impact of a particularly large penalty for one taxpayer in the previous year. The amount raised this year was broadly consistent with longer-term averages.
Penalty amounts will differ depending on the shortfall amount and the behaviour leading to the shortfall. In certain circumstances, penalties may also be doubled for taxpayers that are significant global entities. This can lead to significant variability in amounts.
In relation to the penalty liabilities raised for 2025–26:
- 32 taxpayers received penalty assessments
- 5 taxpayers received penalties greater than $10 million accounting for $406 million of liabilities.
Interest is calculated as per the statutory formula. Under the law, we are required to consider remission of interest and penalties in certain circumstances. Our staff must follow PS LA 2006/8 when considering imposition and remission of the shortfall interest charge and general interest charge, and PS LA 2012/5 when considering imposition and remission of administrative penalties.
Interest increased from $330 million in 2024–25 to $354 million in 2025–26, despite lower primary tax liabilities. This reflects the way interest is calculated: it depends not only on the amount of primary tax raised but also the relevant years to which the liability relates. Interest may also be reduced where remission is appropriate. As a result, annual interest outcomes don't necessarily move in line with primary tax liabilities.
|
Industry |
Number of taxpayers |
Proportion of taxpayers |
Proportion of income tax liabilities |
|---|---|---|---|
|
Wholesale, retail & services |
67 |
52% |
50% |
|
Manufacturing, construction & agriculture |
27 |
21% |
31% |
|
Banking, finance & investment |
19 |
15% |
5% |
|
Mining, energy & water |
14 |
11% |
13% |
|
Total |
127 |
100% |
100% |
Note: Percentage totals may not add up to 100% due to rounding.
The wholesale, retail and services industry represents the most significant proportion of income tax liabilities raised (50%) whilst representing 52% of taxpayers issued assessments. The largest 4 disputes accounted for more than 50% of the total tax liabilities raised for all wholesale, retail and services taxpayers.
|
Industry |
No of taxpayers |
Proportion of taxpayers |
Proportion of tax liabilities |
|---|---|---|---|
|
Wholesale, retail & services |
4 |
57% |
46% |
|
Manufacturing, construction & agriculture |
2 |
29% |
40% |
|
Mining, energy & water |
1 |
14% |
13% |
|
Total |
7 |
100% |
100% |
Note: Percentage totals may not add up to 100% due to rounding.
As previously noted, 7 taxpayers received an amended assessment greater than $50 million this year, raising liabilities of approximately $842 million. Consistent with the broader group of assessments; taxpayers from the wholesale, retail & services; manufacturing, construction and agriculture sectors contribute a significantly higher proportion of raised tax liabilities.
|
Financial year |
Primary GST liability |
Interest |
Penalties |
Total liabilities |
|---|---|---|---|---|
|
2026 |
$243 million |
$25 million |
$37 million |
$305 million |
|
2025 |
$359 million |
$14 million |
$12 million |
$385 million |
|
2024 |
$316 million |
$7 million |
$39 million |
$362 million |
|
2023 |
$191 million |
$6 million |
$6 million |
$202 million |
|
2022 |
$377 million |
$33 million |
$3 million |
$413 million |
Note: Components may not sum to totals due to rounding.
The total liabilities for GST raised were $305 million in 2025–26, a decrease from last year's results. This was mainly due to lower primary GST liabilities, which fell from $359 million to $243 million. Both penalties and interest increased significantly from last year. The decrease in primary liabilities largely reflects the impact of a particularly large assessment finalised in the previous year. The amount raised can vary from year to year depending on the timing, size and mix of matters finalised.
Around 33% of the total liabilities for GST resulted from voluntary disclosures made under our assurance and risk-based engagements in 2025–26. Voluntary disclosures can be a sign of good governance for businesses if they are detecting errors and making voluntary disclosures as part of their business-as-usual governance processes.
However, many businesses wait to be notified of our review activity before doing any checks. We review voluntary disclosures to ensure that remediation plans are in place to ensure the error does not happen again.
As noted in last year's report, GST audits are not as common as income tax audits (although this may change in the future). Nonetheless, we typically expect GST liabilities to average around $300 million per annum.
Independent review
We may offer large businesses the opportunity to apply for an independent review of proposed audit adjustments if they meet certain eligibility criteria (see Large market independent review). These reviews occur before an audit assessment or amended assessment is issued. There is no legal right to an independent review. Independent reviews are conducted by a separate business line, by an independent senior officer in our Objections and Review branch. Other dispute resolution options, like the objection process, are still available after an independent review.
The independent review service is generally not offered for matters about transfer mispricing or which involve the application of anti-avoidance rules. Some matters may also be ineligible if they are considered through other processes, such as the General Anti-Avoidance Rules Panel.
Nine matters from Public Groups were subject to independent review in 2025–26. In two independent reviews, it has been determined that the ATO compliance team had or partially had the better view. The remaining 7 are still being assessed as at 30 June 2026.
The low number of independent reviews, in part, reflects that many audits involve transfer pricing or the application of the anti-avoidance rules and are consequently not eligible for independent review.
Following a review of the independent review service, large market independent review will be discontinued from 1 October 2026. We are committed to early dispute resolution and are focused on continuing to have effective options for large market taxpayers. Taxpayers will continue to have access to other dispute resolution options.
Disputing amended assessments
Generally, taxpayers have a legal right to object to some decisions we make. This includes, for example, amended assessments issued following an audit or the issuing of a private binding ruling decision.
Of the $1.24 billion in primary tax liability raised during the year, $319 million was not disputed and was paid (or is expected to be paid). The balance of $924 million is being disputed (or potentially disputed).
Payment of tax in dispute
Large businesses are expected to pay all or part of the liability owing. Some Large businesses enter into a 50:50 arrangement, paying 50% of the tax liability and fully paying any diverted profits tax (DPT) assessments whilst the dispute is being resolved. If the dispute is resolved wholly in our favour (for example, via litigation), the remaining 50% of primary tax and interest charge are payable to us. If the decision is wholly favourable to the taxpayer, any primary tax paid is refunded to the taxpayer together with interest.
Approximately $267 million has been paid under a 50:50 arrangement in respect of income tax assessments issued in 2025–26. We expect this number to increase as some taxpayers still have time to object to their assessment and enter into a 50:50 arrangement.
Taxpayers can also object to assessments received in respect of penalties. Generally, we have not enforced payment of this amount until both the substantive tax and penalty disputes are fully resolved.
Disputed assessments
Objections for disputes involving public and multinational businesses can often take years to determine. This is partly due to the factual and legal complexity of the matters. Some matters will also be put on hold pending other processes such as the mutual agreement procedure under double tax treaties.
Taxpayers are legally able to, and typically do, provide substantial additional information as part of the objection process. Similarly, we may seek additional information through the objection process. New information can impact the outcomes reached at audit. We continue to encourage taxpayers to provide all relevant information as part of the audit process, so that information can be considered and factored into our position as early as possible.
The following table shows the total liabilities in ongoing disputes for assessments issued in the past 4 years.
|
Year audit assessment issued |
Matters still in objection |
Matters still in litigation |
Tax in dispute |
Interest in dispute |
Penalties in dispute |
Total in dispute |
|---|---|---|---|---|---|---|
|
2025-26 |
18 |
1 |
$691 million |
$260 million |
$372 million |
$1.32 billion |
|
2024-25 |
17 |
2 |
$2.03 billion |
$312 million |
$1.10 billion |
$3.45 billion |
|
2023-24 |
11 |
2 |
$2.01 billion |
$100 million |
$55 million |
$2.16 billion |
|
2022-23 |
10 |
0 |
$779 million |
$262 million |
$389 million |
$1.43 billion |
Note: Primary tax and penalty matters are included separately in the count of matters in objection and litigation.
We made objection decisions regarding 12 primary tax disputes and 6 penalty disputes with public and multinational businesses in 2025–26. In 11 disputes, the objections were found either invalid, withdrawn or withdrawn due to settlement.
We found in favour of the ATO in whole or in part in the majority of cases as follows:
Tax liability:
- 11 (92%) in favour of ATO in whole or in part (4 of these were appealed)
- One (8%) in favour of the taxpayer
Penalties:
- 2 (100%) in favour of the ATO in whole or in part
- Zero in favour of the taxpayer
Similar to last year's observations, this suggests that the decisions of compliance teams are being at least partly upheld in most cases.
Dispute resolution
Settlements
Settlements and litigation are both important components of our dispute resolution strategy. We settle disputes where appropriate, and, alternatively, we pursue other matters in court.
Settlements contribute to a well-functioning tax system, providing fairness and an efficient use of our resources. Settlements secure revenue that may otherwise be at risk or difficult to pursue due to time, cost and legal risk.
Our approach to settlements with public and multinational businesses
We only settle disputes when it is appropriate. We are guided by the ATO's Code of settlement and our obligations under the Legal Services DirectionsExternal Link, including the obligation to act as a ‘model litigant’.
When deciding whether to settle disputes, we consider the strength of the parties' positions, the cost and benefits of the dispute continuing and the overall value for the community. We may engage experts and senior legal counsel to assist in determining the prospects of success and whether settlement is appropriate. Each dispute is considered on its merits regarding the facts and issues, evidence on hand and the individual circumstances of the dispute. For more information see Managing disputes with large corporate groups.
Settlement statistics for public and multinational businesses 2025–26
We entered into 30 settlements with 42 public and multinational businesses in 2025-26. This includes settlements across all parts of the ATO not just Public Groups.
It is common for disputes with public and multinational businesses to involve several legal entities within an economic group. As a result, settlements typically have multiple counterparties as signatories to the settlement deed.
These 42 parties to settlement agreements accounted for around 20% of parties to settlements across all client groups, and the settlements secured around 44% of the total tax revenue.
Settlements with public and multinational businesses secured around $1.31 billion of tax revenue in 2025–26. This is higher than last year’s $811 million of tax revenue but less than the 5-year average of approximately $1.68 billion per annum. The varying size and nature of disputes means settlement amounts fluctuate from year to year.
Figure 1: Five-year trends for tax revenue secured from settlements with public and multinational businesses
Our settlements also secure outcomes for future periods where relevant and appropriate. If a risk is systemic in nature, spanning years, for example related party loans, we generally only settle if the taxpayer agrees to change their future behaviour driving the tax outcomes or tax performance. This includes securing agreement from the taxpayer to unwind arrangements or features of an arrangement that concern us.
This means, in addition to resolving past years, we achieve future behavioural change and increased tax collections through the settlement process. This creates greater certainty for the tax system and government revenues. This year, 14 public and multinational business settlements include future-year obligations.
Types of issues settled
In 2025–26, around 90% of settlements with public and multinational businesses related to income tax, with the remaining 10% involving indirect taxes.
The most common Tier 1 behaviours amongst the 30 settlements were international related party dealings and domestic tax positions, with each accounting for 33% of settlements. Cross-border investment structures accounted for around 20% of settlements.
Settlements involving transfer pricing risks were again prevalent in 2025–26. These issues are typically fact-dependent, potentially involving the consideration of complex valuation, pricing and economic issues. The ability to ‘lock in’ future satisfactory pricing (rather than potentially having to re-audit and then re-litigate) provides certainty for both parties.
Stage at which matters settle
Settlement can occur at any stage, including before an audit starts, during an audit, objection or litigation. However, we will not settle a dispute until we have sufficient information to understand the facts and issues.
In 2025–26, 15 of all public and multinational business settlements occurred before or during an audit. A further 12 settlements occurred during an objection and 3 at the litigation stage.
Settlement variance
Settlement variance reflects the amount that we have conceded in reaching settlement as compared with our pre-settlement starting position.
Our total settlement variance for public and multinational business was around 42% in 2025–26. This means we secured 58% of the disputed amount that we considered payable under our pre-settlement starting position.
With the significant size of public and multinational business disputes and differing legal risk between matters (and therefore settlements), settlement variance may move sharply from year to year. Our 5-year average settlement variance with public and multinational businesses is around 41% (that is, on average around 59% of revenue is secured). This is consistent with the average variance across all client segments.
Figure 2: Five-year trends for public and multinational business settlement tax variance
Adjustments made in our settlements depend on the facts and legal issues in dispute. The variance from our starting position does not necessarily represent an amount that would have been collected had the dispute continued. For example, the taxpayer may provide further and better evidence to support their position over time.
Rigorous processes support our settlement positions. We consider advice by legal counsel and experts, as well as the surrounding circumstances of each dispute.
For our significant settlements, our decision-making process is reviewed independently by a former federal court judge to assess whether it is fair and reasonable as outlined below. See Independent assurance of settlement outcomes.
Ensuring compliance for the future
To create certainty for us and the taxpayer, our settlements will often secure future tax outcomes by setting the basis on which a taxpayer will lodge in the future.
If a settlement provides for ongoing, or future, treatment of an arrangement, we monitor subsequent lodgments to ensure compliance with the terms of the settlement.
Taxpayers are required to annually disclose, via the reportable tax position (RTP) schedule, if they have complied with a settlement agreement in place for the year and if there have been changes in the relevant and material facts on which the settlement was based. We provide information on the aggregated disclosures made by large public and multinational businesses through Category C of the RTP in our RTP Findings Report.
There were 31 disclosures made in relation to a taxpayer's compliance with future year compliance agreements for 2024–25.
Out of the 31 disclosures made for 2024–25, 2 disclosures were in relation to changes in the relevant and material facts. We continue to monitor and engage with taxpayers to confirm compliance with the terms of their settlement deeds or future compliance arrangements. For more information see Findings report RTP – Public and multinational businesses.
We may also verify compliance with settlement terms as part of our engagement through the Justified Trust program, or as part of a specific engagement.
Transparency and settlement
We are committed to transparency with our approach to collecting revenue and delivering results for the Australian community. The details of specific settlements are covered by confidentiality provisions and the tax secrecy requirements of the taxation law.
With significant public interest in these matters, we encourage large businesses to publicly disclose when they enter settlements with us. Particularly sensitive settlements may require a public disclosure as part of the settlement agreement. In some cases, we will also issue a media statement following a public disclosure of a settlement.
Sharing settlements with other jurisdictions
International Exchange of Information (EOI) is key to sharing taxpayer-related information between Australia and other jurisdictions to administer and enforce Australia's tax laws. Settlement information may be exchanged with our treaty partners if they are relevant to the administration and enforcement of each other's domestic tax laws.
External scrutiny of our settlement decisions
Our settlement practices have been subject to external scrutiny by the Australian National Audit Office (ANAO). For more information see The Australian Taxation Office’s Use of SettlementsExternal Link. The ANAO found our practices effective, and that settlements have been entered into, negotiated and followed up in line with our settlement policies and procedures, including the principles outlined in the ATO's Code of Settlement.
The ANAO found, when compared with other national revenue authorities, that we provide the highest level of public reporting around settlement activities. Our focus remains on ensuring we continue to deliver this benchmark of transparency and reporting around our settlement activities.
Independent assurance of settlement outcomes
The Independent Assurance of Settlements (IAS) Program is an important cornerstone of our approach to maintaining community confidence in the Australian taxation and superannuation systems. Under this program, we engage a former federal court judge to independently assure our largest and most significant settlements. This provides community confidence that our settlements and settlement process are fair and reasonable.
Settlements satisfying any of the following criteria will be subject to assurance by a former federal court judge:
- if a pre-settlement starting position is greater than $50 million
- a settlement amount greater than $20 million
- the settlement variance is greater than $20 million.
Deputy Commissioners can also refer a settlement for review under this program, even if it doesn't meet the standard criteria. Examples of this include:
- if public interest in the settlement is likely
- a former ATO Assistant or Deputy Commissioner is representing the taxpayer in the settlement process
- the settlement is the first dealing with particular matters and we want to test our approach.
Outcomes from the IAS program are reported in our annual report. As independent assurers review settlements after they are finalised, they may not be reviewed in the same income tax year in which they were settled.
Five settlements with public and multinational business were independently reviewed under our IAS Program in 2025-26. As at 30 June 2026, there are a further 12 settlements with public and multinational business that are referred and awaiting IAS review.
All of the 5 settlements reviewed were found to have achieved a fair and reasonable outcome for the Australian community.
Feedback from the IAS program is invaluable and we thoroughly consider all findings. Disputes with public and multinational businesses are highly complex. We continuously look to improve corporate settlement practices to ensure settlement practices and decisions are robust. This is fundamental to ensuring we can demonstrate that our settlements are fair and reasonable.
Our corporate settlement processes ensure settlements are only concluded in the best interests of the community, adhering to our ATO Code of settlement. Our commitment to considering all recommendations from our independent assurers, regardless of the finding, ensures a well-functioning settlement system. We are continually strengthening our settlement systems and practices, and have been:
- implementing improvements to our corporate settlement practices which incorporate feedback from the IAS program
- engaging with our key stakeholders to enhance transparency and accountability
- regularly reviewing and looking for opportunities to refresh our systems and tools that support settlement decisions.
Litigation
Litigation is an important part of our dispute resolution strategy, and we aim to have appropriate matters pursued in the Administrative Review Tribunal or the Courts. Typically, this will be if it is appropriate to clarify the operation of the law, we want to send a strong signal about unacceptable behaviours (such as tax avoidance), or if there are significant intractable disputes.
There were 7 litigation decisions handed down involving public and multinational businesses in 2025–26:
- 3 decisions were favourable to the Commissioner (43%)
- 4 decisions were unfavourable to the Commissioner (57%)
We carefully consider all litigation outcomes and adjust our compliance approach and guidance to reflect the courts’ decisions and interpretation of the law. To further guide large businesses, we issue decision impact statements to ensure taxpayers understand our view of the decision.
The following table shows a list of decisions handed down during 2025–26 in litigation matters involving public and multinational businesses.
|
Matter |
Issues |
Outcome |
|---|---|---|
|
Tabcorp Maxgaming Holdings Limited v Commissioner of Taxation [2026] FCAFC 30
|
Taxation of financial arrangements (TOFA) |
A favourable outcome for the Commissioner at the Full Federal Court. Awaiting outcome on the Special Leave Application to the High Court. |
|
Oracle Corporation Australia Pty Ltd v Commissioner of Taxation [2025] FCAFC 145 (Stay application) |
Double taxation treaties and mutual agreement procedures |
An unfavourable outcome for the Commissioner at the Full Federal Court on this stay application. |
|
Commissioner of Taxation v PepsiCo Inc & Anor [2025] HCA 30 |
Royalty withholding tax and diverted profits tax |
An unfavourable outcome for the Commissioner at the High Court. We have published a Decision Impact Statement outlining our view on the implications of this decision. |
|
YTL Power Investments Limited v Commissioner of Taxation [2025] FCA 1317 |
Capital gains tax on foreign residents |
An unfavourable outcome for the Commissioner at the Federal Court of Australia. Currently on appeal at the Full Federal Court. |
|
Shell Energy Holdings Australia Limited v Commissioner of Taxation [2026] FCA 577 |
Capital gains tax on disposal |
An unfavourable outcome for the Commissioner at the Federal Court of Australia. Currently on appeal at the Full Federal Court. |
|
Prestige Form Group NSW Pty Ltd v Commissioner of Taxation [2026] ARTA 627 |
Fringe Benefits Tax |
A favourable outcome for the Commissioner at the Administrative Review Tribunal. |
|
Ausnet Services Ltd v Commissioner of Taxation [2025] HCADisp 166 |
Capital gains tax |
Taxpayer’s Special Leave Application to the High Court was refused. |
Mutual agreement procedure
Australia's network of double taxation treaties allows taxpayers to request a mutual agreement procedure (MAP) if they consider an action by a Contracting State (Australia or its tax treaty partner) has, or is likely to, result in taxation not in accordance with the relevant Tax Convention (tax treaty).
If we take action in relation to cross-border dealings, for example, raising an amended assessment, this may give rise to the taxpayer being assessed on the same income, profit or gain twice – once in Australia, and once in the other jurisdiction.
If there is a tax treaty between Australia and the other jurisdiction, the taxpayer may request a MAP to relieve taxation caused by the action taken by Australia or the other jurisdiction that is party to the tax treaty. Depending on the tax treaty, the MAP request can be lodged in either jurisdiction or in the jurisdiction where the taxpayer is a resident.
MAP applications generated from compliance activities of treaty partner jurisdictions and lodged in the other jurisdiction are known as inbound MAPs. Outbound MAPs emanate from action undertaken by the ATO to place the taxpayer in a position where taxation has or will likely result in taxation not in accordance with the tax treaty.
Under a MAP, Competent Authorities (CA) of the relevant jurisdictions engage to resolve the treaty issues and double taxation. In most cases we can reach agreement with the other jurisdiction to resolve the MAP. The taxpayer is not involved in these negotiations and is not legally bound by them. Where the CA agreement fully resolves in a manner where taxation is in accordance with the treaty, we generally expect the taxpayer to accept the outcome.
Some treaties provide taxpayers with the ability to request mandatory arbitration, if an agreement has not been reached by the respective CAs in the specified time period (usually 2 years from the arbitration start date). If this occurs, taxpayers have the right to request arbitration for those unresolved issues. To date, we have had only one dispute progress to a mandatory arbitration stage, originating from compliance action outside of the PG business line. Arbitration outcomes are not binding on the taxpayer but are binding on the jurisdictions that are parties to the tax treaty.
We had 30 open MAPs arising from Public Group’s audit activities, as of 30 June 2026. We received 7 new MAP requests resulting from our audits in 2025–26. During the year we concluded 8 MAPs related to ATO disputes. All started in prior years. One MAP request was withdrawn by the taxpayer and for the remaining cases closed in the financial year, in all but one case, a mutual agreement was reached with our treaty partners fully resolving double taxation.
Note: An adjustment was required to the reported number of open MAP cases at the end of the prior financial year. At the start of the 2025–26 financial year, we had 31 outbound MAP cases open. The adjustment was due to late advice from a treaty partner of a lodged MAP request from ATO compliance action.
Common issues of MAPs related to ATO disputes reflect issues in our audit program, that is, inbound distribution, intra-group licencing, service agreements, and commodity exports.
The following table shows details of concluded MAPs in relation to ATO disputes with public and multinational business for the past 4 years (24 in total).
To avoid doubt, we note that this data does not include MAP requests received as a result of other jurisdictions' compliance activities or requests not arising from compliance actions (for example, requests for residency determination).
|
Financial year |
Closed cases |
Primary issue |
Countries |
|
|---|---|---|---|---|
|
2026 |
9 |
Various |
Czech Republic Ireland USA Germany |
|
|
2025 |
3 |
Transfer pricing |
USA Sweden China |
|
|
2024 |
6 |
Transfer pricing, royalties
|
China India |
|
|
2023 |
7 |
Transfer pricing |
Germany India Ireland Japan Singapore |
|