Tax insights

On 10 December 2025, the ATO released draft Practical Compliance Guideline PCG 2019/DC1, which is a draft consolidation for comment, outlining proposed changes to PCG 2019/1 Transfer pricing (TP) issues related to inbound distribution arrangements, to ensure the ATO’s profit markers for assessing transfer pricing risk remain relevant and up to date.

Set out in this Tax Insight are the key changes proposed in PCG 2019/1DC compared to the original PCG 2019/1, as well as Deloitte’s observations on practical implications for inbound distributors to consider.

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The YTL Power and Newmont decisions of the Federal Court of Australia provide critical guidance, with particular relevance to the power and utilities sector and infrastructure more broadly. Both judgments apply a consistent interpretative approach to Division 855. Further details on the context, background and detail of these decisions are highlighted in this Tax Insight.

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On 4 November 2025, the Australian parliament passed two bills without amendment. This legislative package introduces “Payday Super,” which will see a significant shift in the superannuation guarantee landscape for Australian employers. This Tax Insight provides an overview of the legislative changes, the background to the changes, and recommended actions for employers to be ready.

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On 31 October 2025, the ATO released draft instructions to complete the Public CbC report. We set out in this Tax Insight an overview of the requirements of the Public CbC regime, together with highlights of the draft instructions and other guidance to date. 

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Key issues for the financial services & insurance sectors

In this second article in our series, we consider the key challenges facing groups operating in the financial services & insurance sectors as they work towards compliance with the Pillar Two rules.

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The ATO, on 22 October 2025, released new guidance on its website in respect of the application of the Transitional CbC Reporting Safe Harbour provisions (Transitional Safe Harbour) contained in the Pillar Two rules in Australia.

The Guidance aligns with the OECD Model Rules as published on 20 December 2021 and relevant Consolidated Commentary regarding the application of the Transitional Safe Harbour. In addition, it provides helpful clarifications such as the use of consolidated financial data at the jurisdiction level when preparing the CbC Report and the issue of whether a deduction/non-inclusion arrangement can arise with respect to certain transactions occurring within an Australian income tax consolidated group, as summarised in the Tax Insight.

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Further finalised guidance is expected in late 2025 in the form of a final Practical Compliance Guideline titled Factors to consider when determining the amount of your cross-border related party finance arrangement in relation to the determination of the arm’s length amount of debt for transfer pricing purposes (subdivision 815-B of the Income Tax Assessment Act 1997). This PCG will also outline specific features of financing arrangements and transfer pricing analysis which the ATO would view as being of concern. 

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On 18 September 2025, the ATO published its findings reports from the Top 100 and Top 1,000 justified trust assurance programs undertaken in the year ended 30 June 2025. The findings reports continue to allow large businesses to objectively benchmark their ratings to their peers and highlight areas of regulatory focus to assist businesses to proactively manage tax risk and prepare for an upcoming review.

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On 24 September 2025, the ATO finalised PCG 2025/3 dealing with the ATO’s compliance approach to “capital raised for the purpose of funding franked distributions.” The ATO also issued a compendium PCG 2025/EC3 which reflects submissions and ATO responses following the issue of PCG 2024/D4 on 4 December 2024.

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On 27 August 2025, it was announced that the independent expert panel leading the Strategic Examination of Research and Development will be consulting on issues papers to inform the examination. The first paper presents a model for a more coordinated national approach to research, development and innovation (RD&I). A key focus of this model is overcoming the fragmentation in the current RD&I system and providing more  targeted support to key priority areas (e.g. health, defence, agriculture, energy, and resources) to improve thescale and impact of RD&I outcomes.

Discussions around the proposed reforms are a welcome step towards making the RDTI more effective, particularly as part of a more coordinated model to drive enhanced collaboration and targeted investment aligned with national strategic priorities. Nonetheless, clear and decisive action is required to maximise the impact of RD&I across industry, academia and government to enable Australia to develop a resilient, coordinated, and globally competitive R&D system—one that delivers value for business, society, and future generations.

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