What’s changing in ATO compliance priorities?
Following the Federal Budget, Australian tax authorities have announced an extension of the Tax Avoidance Taskforce until 30 June 2028, with AU$1.2 billion in funding allocated to step up audits and ensure compliance among large businesses and multinationals.(ato.gov.au)
Additionally, there’s a greater emphasis on taxpayer audits over:
- Overclaiming deductions
- Incorrect reporting of income
- Inappropriate treaty or royalty payments (especially involving intangible assets and licensing/IP transfers)(ato.gov.au)
- Compliance behavior of tax agents and intermediaries
Actionable steps for large entities to stay compliant
- Conduct internal reviews of royalty, licence and intangible payments: Ensure substance and documentation match amounts paid abroad.
- Evaluate current deductions: Are there large or unusual deductions that might invite scrutiny?
- Engage tax professionals with international tax expertise, especially for MITs and treaty issues.
- Keep up-to-date with ATO published draft rulings (e.g., software distribution, IP use) and public guidance to anticipate changes.(ato.gov.au)
- Formalize compliance programs internally: risk assessment, documentation, and monitoring.
Example of risk: royalty payments for IP
A multinational group licenses software to its Australian subsidiary. The royalty is paid to a related entity in a low-tax jurisdiction and is based on a contract with vague terms. Under ATO’s scrutiny, this could be challenged, withholding taxes may be increased, Part IVA may apply, and treaty relief could be denied. Better drafting, true economic benefit, arms-length conditions help mitigate risks.
What the timelines look like
- Many changes are already law, e.g., tax cuts and MIT rule clarifications.(ey.com)
- Draft rulings and guidance are often in consultation—stakeholders are encouraged to respond quickly.
- Penalty and sanction relief may be available during transitional periods if taxpayers act in good faith and co-operate.
Conclusion: The ATO is sharpening its lens. Large businesses and multinationals should proactively audit themselves, ensure treaty and transaction integrity, document everything—and treat the budget’s announcements as your roadmap for staying compliant in this new era of enforcement.