Royalty withholding tax and software arrangements – draft ATO compliance approach for low-risk payments released

The release of the draft practical compliance guideline has been highly anticipated in providing greater certainty to taxpayers, as outlined by Paul Sorrell, Jennifer Ta, Jeremy Capes and Amanda Maguire.

The Australian Taxation Office (ATO), on 6 August 2025, released a draft practical compliance guideline on low-risk payments relating to software arrangements, Draft Practical Compliance Guideline PCG 2025/D4 (PCG 2025/D4 or the PCG). The stated purpose of PCG 2025/D4 is to provide "certainty about when the ATO will not review software arrangements to determine whether any part of a cross-border payment made to a non-resident is a royalty and subject to withholding tax (royalty risk)". The ...

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Authors: Paul Sorrell, Jennifer Ta,

Published Date: 08 August 2025