Practical Compliance Guideline PCG 2024/1 Intangibles migration arrangements has been finalised and published.
The PCG was previously released in draft as PCG 2021/D4 and PCG 2023/D2 Intangibles arrangements.
The PCG sets out our compliance approach to, and helps taxpayers to self-assess, the tax risks associated with certain cross-border related party intangibles arrangements involving:
- restructures or changes to arrangements involving intangible assets (referred to as 'migrations' in the PCG)
- the mischaracterisation or non-recognition of Australian activities connected with intangible assets.
The PCG is intended to help taxpayers understand the behaviours and factors that attract our attention in relation to related party cross-border intangibles migration arrangements by:
- providing a risk assessment framework that helps taxpayers understand the features we consider to may indicate greater compliance risks
- providing examples demonstrating how the framework can be applied to the kinds of arrangements we have seen and explaining the compliance risks that we consider may arise
- outlining the level of evidence we might expect taxpayers to provide in relation to intangibles arrangements – we will more intensively investigate and verify facts and evidence relating to higher risk arrangements.
In response to feedback we received throughout the consultation process, we've made changes to the PCG, including:
- further clarification of the arrangements in scope of the PCG
- exclusion of certain arrangements ('Excluded Intangibles Arrangement') from the scope of the PCG to make it easier for taxpayers to apply the PCG
- inclusion of a ‘white zone’ for arrangements that have been subject to previous ATO audit or reviews
- further explaining our compliance approach, including the engagement taxpayers can expect based on the compliance risks associated with an arrangement
- expanding the guidance allowing taxpayers to group intangible assets or arrangements to make it easier for taxpayers apply the PCG
- providing more information on the reporting requirements taxpayers can expect to complete the reportable tax position schedule.
The PCG doesn't address our compliance approach to other tax issues that might arise in connection with Intangibles Migration Arrangements, such as the characterisation of outbound payments (mischaracterised or 'embedded royalty' risk), or the valuation or pricing outcomes of an arrangement.
It's important to note that this PCG is independent of and doesn't address the multinational tax integrity measure Deductions for payments relating to intangible assets connected with low corporate tax jurisdictions announced as part of the 2022–23 Budget.
Find the final PCG on the Legal Database.