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The ATO has released final guidance on the royalty characterisation of software distribution, intermediation and intellectual property arrangements through TR 2026/2 and draft PCG 2026/D4. The guidance clarifies when software-related payments may be treated as royalties and subject to royalty withholding tax, while introducing a practical compliance risk framework.

In this edition of our Australian International Tax Update, we summarise recent significant Australian tax developments, examine their practical impact, and outline actions that multinational groups, foreign investors, private equity funds and international advisers should consider.

Explore tax strategies to manage labour, fuel, import and cash flow pressures in construction.

Loss carry back Australia 2026 helps companies turn tax losses into refunds and improve cash flow.

Foreign resident CGT reforms expand taxable Australian real property, withholding and renewables discount.

Explores proposed CGT discount and negative gearing reforms and what they could mean for investors.

In July 2025, we wrote about the Federal Court’s decision in S.N.A Group Pty Ltd v Commissioner of Taxation [2025] FCA 240, which was widely seen as a ‘commercial reality’ endorsement for inter entity service fee arrangements in closely held groups – where documentation is known to be imperfect.

From the introduction of Pillar Two to increased debt deduction limitations and public reporting obligations, the international tax landscape is shifting rapidly.

OECD announces the ‘Side-by-Side’ administrative guidance package

The Australian Pillar Two Rules align with the OECD’s initiative to ensure MNEs pay a minimum Effective Tax Rate (ETR) of 15 per cent globally.

On 10 November 2025, the Federal Court handed down its decision in Newmont Canada FN Holdings ULC v Commissioner of Taxation (No 2) [2025] FCA 1356.The case provides important guidance on the interpretation of ‘taxable Australian real property’ (TARP) under Division 855 of the Income Tax Assessment Act 1997 (Div 855).

On 24 September 2025, the ATO released PCG 2025/3 (‘the PCG’), setting out its compliance approach to arrangements where capital is raised to fund franked distributions. This was after their consultation on the draft PCG.