Australia Tax Update: ATO Finalises Software Royalties Ruling, Contractor Super Guidance and Startup CGT Reforms (14 September 2026)

by Ariful | Sep 14, 2026 | Australia Updates

TITLE: ATO Software Royalties, Contractor Super and CGT Concession Changes: What Australian Businesses Need to Know

Review software payments under final ATO royalties ruling

The ATO released Taxation Ruling TR 2026/2 on 4 September 2026. It explains when payments made under software intermediation and distribution arrangements may be treated as royalties for Australian tax purposes.

The key issue is whether a payment is made for the use of, or the right to use, copyright or other intellectual property. This can include implied rights, even where the contract does not expressly describe a copyright licence.

The ruling may affect:

• Cloud software and SaaS distribution arrangements.
• Subscription platforms and app marketplaces.
• Australian entities distributing offshore software.
• Businesses that do not own, host or develop the underlying software.
• Cross-border payments to software owners or licensors.

This means a payment may potentially attract Australian royalty withholding tax even where the Australian business only facilitates access, distribution or subscriptions. The ATO position is relevant to major multinational technology groups, including businesses operating in ecosystems associated with Apple, Google, Microsoft and Amazon.

The ruling applies to arrangements both before and after its release. You should therefore review existing agreements, payment flows and withholding processes rather than limiting your review to new contracts.

The ATO also issued draft Practical Compliance Guideline PCG 2026/D4. It proposes five colour-coded risk zones:

• White.
• Green.
• Yellow.
• Amber.
• Red.

Many SaaS and subscription distribution models may fall within the amber zone unless the business recognises a royalty position and manages the related withholding obligations appropriately.

Consultation closes on 2 October 2026. Businesses with affected arrangements should review the draft guideline and document their position before the deadline.

Read the final ATO software royalties ruling and the draft PCG 2026/D4 compliance framework.

Separate contractor labour costs before calculating super

The ATO has released draft Superannuation Guarantee Determination SGD 2026/D1. It clarifies how businesses should calculate superannuation obligations for contractors who are treated as employees under the extended definition.

The core rule is straightforward. You must identify the part of a contractor payment that relates to the individual’s labour. Superannuation applies to that labour component.

Non-labour amounts may generally be excluded where they relate to items such as:

• Materials.
• Plant or equipment hire.
• Genuine reimbursements.
• Third-party costs.
• Costs paid as the client’s agent.
• The GST component.

Invoices that clearly separate labour and non-labour costs are easier to process. If an invoice combines everything into one amount, you need a reasonable and documented methodology for calculating the labour component.

Your records should explain:

1. What services the contractor provides.
2. Which costs relate directly to personal labour.
3. Which costs are materials, reimbursements or third-party charges.
4. How you calculated the labour proportion.
5. Why the methodology is reasonable for the relevant industry and contract.

This guidance is particularly important now that Payday Super is in effect. Payroll and accounts payable systems must identify qualifying contractor payments accurately and process superannuation on time.

Review contractor agreements and invoice templates now. Doing so will reduce the risk of underpayments, correction work and ATO compliance action.

See the ATO draft SGD 2026/D1 and the ATO information on working out whether you must pay super for contractors.

Prepare for the proposed Innovative Business CGT Concession

Treasury released exposure draft legislation for the Innovative Business CGT Concession on 11 September 2026.

The proposed concession is intended to support investment in eligible innovative Australian companies. It would provide a 50% capital gains tax discount where the relevant requirements are met.

The exposure draft proposes:

• A 15-year eligibility window for qualifying companies.
• An aggregate company turnover threshold of $50 million.
• A minimum holding period of three years.
• Removal of the previously proposed $10 million lifetime cap on eligible gains.

The concession remains proposed. It is not yet a final law. Eligibility will depend on the detailed legislation, the company’s structure, the nature of its innovation, the timing of the share issue and the investor’s holding period.

This could be relevant to Australian startups, technology businesses, digital companies and investors holding qualifying equity. However, you should not assume that every early-stage or high-growth company will qualify.

Treasury submissions close on 28 September 2026. Businesses and investors should review the official Treasury exposure draft consultation and monitor the final legislation before relying on the proposed concession.

Keep records ready for wider ATO visibility

The ATO’s passenger movement data-matching program will provide broader visibility over selected individuals entering and leaving Australia through the 2028–29 financial year.

The program can match passenger information with tax registration, lodgment, payment and residency records. This may affect internationally mobile directors, contractors, employees and business owners.

Keep your records consistent across:

• Travel dates.
• Residency positions.
• Payroll records.
• Australian and offshore income.
• Company management activity.
• GST, income tax and superannuation reporting.

The ATO is also continuing its push to address approximately $115 billion in unpaid tax debt. On-the-spot late interest waivers are capped at $4,500. Requests above that amount may require formal review by a specialist team.

Accurate bookkeeping and timely filing remain the best way to avoid preventable interest and debt escalation.

Use a structured global compliance process

These developments show why Australian businesses with cross-border operations, contractor workforces or investor arrangements need a structured compliance process.

A coordinated approach should cover:

• Reviewing software and distribution agreements against TR 2026/2 and PCG 2026/D4.
• Documenting contractor labour splits for superannuation purposes.
• Monitoring the Innovative Business CGT Concession as it progresses through Parliament.
• Keeping residency, payroll and reporting records aligned.
• Addressing ATO debts early to avoid interest escalation.

Given the pace of reform across royalties, superannuation, capital gains tax and data matching, seeking advice specific to your circumstances is essential. The ATO’s positions apply to existing arrangements as well as new ones, so a proactive review now can reduce the risk of unexpected withholding liabilities, superannuation shortfalls and compliance action.

Daily Australia Tax Update: 13 September 2026 — ATO Targets Repeated Nil PAYG Variations, 21 September BAS Deadline & Sham Contracting Crackdown

by Ariful | Sep 13, 2026 | Australia Updates

TITLE: Australia Tax Compliance Update: PAYG, BAS, Payday Super and Contractor Rules

1. Review nil PAYG variations before the ATO reviews them

The ATO is contacting taxpayers and tax agents where PAYG instalments have repeatedly been varied to nil across multiple years without clear supporting evidence.

A nil variation can still be legitimate. You may vary your instalment amount or rate to nil when your expected instalment income is genuinely nil or your current forecast supports no instalment liability.

The risk arises when the variation is used to defer tax despite ongoing profits.

Your variation should be based on financial information that is:

• Reasonable, considering your current contracts, trading results and business conditions.
• Current, using up-to-date accounts and forecasts.
• Substantiated, with records that explain how you calculated the expected result.

The ATO’s 85% rule remains important. If your varied instalments are less than 85% of the relevant final tax position, a shortfall of 15% or more can expose you to the General Interest Charge (GIC) and potentially penalties.

For July to September 2026, the official GIC rate is 11.43% per year, compounded daily. It increases to 11.51% per year from 1 October 2026. GIC incurred from 1 July 2025 is also no longer deductible for income tax purposes.

The 2026–27 GDP adjustment factor is 5% for taxpayers using the instalment amount method. This may increase the standard PAYG amount even when your business income has changed.

Complete this PAYG review

• Compare your current instalments with your latest profit and loss report.
• Update your full-year revenue, margin and tax forecast.
• Reconsider any variation to nil.
• Keep working papers, forecasts, bank data and accounting reports supporting the variation.
• Check whether your instalments remain above the 85% benchmark.
• Pay each instalment by its due date.

The ATO PAYG instalment guidance and ATO GIC rates should be part of your compliance review.

Accountants Daily has also reported on the ATO’s warning about repeated nil variations, while Kalkine has highlighted the effect of the 5% GDP adjustment on 2026–27 instalment calculations.

2. Prepare for the 21 September BAS deadline

Monthly reporters must lodge and pay their August 2026 BAS by Monday, 21 September 2026.

This applies to monthly GST reporters, including many larger ecommerce sellers, digital businesses and international businesses registered for Australian GST.

Before lodging, reconcile:

• GST collected on Australian sales.
• GST paid on eligible business expenses.
• Import GST and customs documentation.
• Marketplace settlement reports.
• Payment processor fees.
• Refunds, chargebacks and credit notes.
• Currency conversions for international transactions.
• The GST treatment of cross-border digital supplies.

Do not rely only on your bank feed. Marketplace and payment processor reports may contain timing differences, fees and refunds that affect your BAS figures.

Our VAT automation and compliance systems can help businesses maintain a structured transaction process. Australian GST still requires accurate local treatment and timely BAS reporting.

3. Close the 30 September payroll and trust obligations

Two important obligations fall on 30 September 2026.

Finalise STP for closely held payees

Employers with closely held payees, such as directors, shareholders or family members, generally have until 30 September to submit their Single Touch Payroll finalisation declaration for the 2025–26 financial year.

Check that:

• Salary and wages agree with the general ledger.
• Director payments are correctly classified.
• PAYG withholding amounts reconcile to activity statements.
• Reportable fringe benefits are included where required.
• Superannuation records agree with payroll records.
• Finalisation declarations are submitted for the correct employees.

Lodge the annual TFN withholding report

Trustees that withheld TFN amounts from closely held trust beneficiaries must lodge the 2026 annual TFN withholding report by 30 September 2026.

Quarterly TFN reporting for closely held trusts ceased from 1 July 2026. Beneficiary TFNs are now reported through the annual trust return process.

Review your trust distribution records, beneficiary details and withholding calculations now. Correct records will reduce the risk of mismatches between the trust return, beneficiary reporting and ATO data.

4. Apply the correct super process under Payday Super

A crucial September point is that Payday Super changes how employers manage superannuation.

For employee earnings paid from 1 July 2026, super contributions must generally reach the employee’s fund within 7 business days of each payday. This is now the main payment rule you need to monitor.

The date of 28 October 2026 still matters. It remains the final end-of-quarter deadline for contributions relating to the quarter ending 30 September 2026. However, it is the backstop, not the target. You should not wait until quarter end if the contribution was required earlier under the 7-business-day rule.

If super remains unpaid after 28 October 2026, you must lodge a Superannuation Guarantee Charge statement and pay the SGC by 28 November 2026. The SGC includes the shortfall, nominal interest and an administration component.

This is also an important control point under Payday Super. For periods after 30 June 2026, late contributions paid directly to a fund cannot be used to offset the SGC liability. That means a late payment does not cancel the charge once the obligation has been missed.

Check your Payday Super controls

• Confirm your payroll software is configured for the new payment timetable.
• Reconcile each payday’s super liability to the fund payment confirmation.
• Track failed, rejected or returned contributions.
• Investigate clearing-house delays immediately.
• Keep evidence showing when contributions were paid and received.
• Do not wait until the end of the quarter to identify unpaid super.

The ATO Payday Super guidance provides the current framework.

5. Review contractor arrangements before regulators do

The ATO and Fair Work Ombudsman are intensifying action against sham contracting.

Sham contracting occurs when a business presents an employment relationship as an independent contractor arrangement. This can lead to PAYG withholding liabilities, superannuation guarantee obligations, penalties and back payments.

Businesses should verify that contractor arrangements reflect the true working relationship, including:

• Control over how, when and where work is performed.
• Whether the contractor operates their own business and bears financial risk.
• Whether the contractor can delegate work to others.
• Provision of tools, equipment and insurance.
• Whether the contractor invoices for services and is paid per project or deliverable.
• Whether the contractor is integrated into the business like an employee.

Written contracts alone do not determine the arrangement if the actual working relationship indicates employment.

Our global payroll outsourcing services support compliant payroll and contractor processes across multiple jurisdictions.

Key compliance dates

Take a structured compliance approach

Australia’s tax compliance focus is tightening across PAYG instalments, BAS reporting, payroll and contractor classification.

If you operate an ecommerce business, SaaS company, agency or growing SME in Sydney, Melbourne, Brisbane, Perth, Adelaide or Canberra, use today’s update to check your records before the next deadlines. International businesses operating in Australia should also review their GST, payroll and contractor processes.

Structured record-keeping, current forecasts and proactive reconciliation reduce the risk of ATO scrutiny, GIC exposure and penalties.