Australia Tax Update: US Treasury Warns of Backlash Over ATO Software Royalty Ruling

by Ariful | Oct 19, 2026 | UK Updates

TITLE: Australia’s Software Royalty Ruling: What the US Treasury Warning Means for Your Business

Understand what the ATO ruling changes

The ATO published final Taxation Ruling TR 2026/2 on 4 September 2026. It considers when payments under software arrangements may be characterised as royalties for Australian tax purposes.

The ruling’s reach may extend beyond a conventional software licence. Depending on the rights and terms involved, payments connected with software, cloud services, streaming or intellectual property may need closer review. The relevant question is not simply whether a business calls a payment a “subscription” or “service fee”. The underlying contract and the rights supplied matter.

If a payment is treated as a royalty and made to a foreign recipient, Australian withholding tax may apply. The outcome depends on the arrangement and any relevant tax treaty. GST is a separate consideration; a payment’s GST treatment does not, by itself, settle its treatment under the royalty ruling.

The ATO has published a software royalties ruling and draft guidance page. Review both the ruling and current guidance when assessing your reporting and payment processes.

See why the US Treasury is concerned

Burch said US companies were concerned about potential double taxation. If Australia treats a payment as a royalty but the United States does not accept that characterisation, the US company may not receive a foreign tax credit for the tax paid in Australia.

“When we risk double tax, we begin to risk investment in local markets,” Burch said, according to the AFR. She also warned that a focus on short-term revenue measures could put investment at risk. The US Treasury has raised concerns with Australian Treasury at least twice over the past five years, the report says.

The practical issue for businesses is uncertainty. A cross-border payment could create an Australian tax cost while also being treated differently in the recipient’s home jurisdiction. That can complicate cash-flow forecasts, tax calculations and financial reporting.

The ruling’s implications may also reach Australian-based global businesses. The AFR cites tax partner Niv Tadmore’s view that software is now embedded in products and services across many industries. This means the issue may be relevant to more than large technology companies. Australian SaaS businesses, agencies, growing SMEs and companies expanding overseas should also check whether offshore payments or receipts involve software or intellectual property rights.

Check your contracts and payment records now

Do not wait for a dispute to identify what your business pays offshore. Build a clear record of the transactions that could be relevant.

Use this checklist:

1. List offshore software and digital suppliers. Include cloud hosting, SaaS subscriptions, streaming or content platforms, software licences and payments for distribution rights. This gives you a complete starting point.
2. Gather contracts and invoices. Keep signed agreements, amendments, invoices and payment records together. Clear evidence helps your team understand what was purchased and when.
3. Separate different payment components. A contract may cover access to a service, support, distribution and intellectual property rights. Record the components separately where your agreement and documentation allow.
4. Identify the recipient and destination of each payment. Note the contracting entity, its country and the entity receiving funds. This information supports accurate cross-border reporting.
5. Keep treaty information with the transaction file. Australia’s tax treaties do not all use identical wording. The ATO materials identify material differences in treaties with countries including the US, the Netherlands, Italy, Singapore and Mexico. Do not assume one treaty analysis automatically applies to another.
6. Record the tax treatment applied. Document how each payment was classified, what information supports that treatment and how any withholding calculation was made. A consistent audit trail can reduce rework if the position is queried.
7. Monitor the ATO’s final compliance guidance. The companion draft PCG 2026/D4 sets out a proposed risk-assessment framework, including safe-harbour concepts. Treat it as draft guidance unless and until the ATO finalises it. Check the ATO page for the latest position.

The ruling applies to payments made both before and after its publication date, according to the information supplied for this update. That makes it important to organise historical records as well as current invoices. If you identify a past payment that may need attention, keep the contract, invoice, payment evidence and calculation together so the next compliance review can address it efficiently.

Keep international compliance work organised

US Treasury’s warning is a significant development, not a final resolution. The ATO says it has been transparent about its position, while the US has raised concerns about double taxation and investment certainty. Further discussion may follow, but businesses still need reliable records and timely compliance processes in the meantime.

For Australian entities with offshore software or SaaS costs, and international businesses earning Australian revenue, keep these tasks in your regular compliance workflow:

• Reconcile supplier invoices and cross-border payments to your bookkeeping records.
• Track tax calculations and applicable filing or payment deadlines.
• Retain the contracts and supporting documents behind each classification.
• Review older transactions as well as new arrangements.
• Update your records when contracts, recipients or payment flows change.

A repeatable process gives you a clearer picture of costs and obligations across reporting periods. It also helps your finance team respond more quickly if the ATO, an overseas tax authority or your external tax professionals request supporting information.

For another current Australian compliance development, read our Australia tax update on draft crypto tax reporting laws.

UK Ecommerce Accounting Update: What Amazon and Shopify Sellers Need to Know This Week

by Ariful | Oct 19, 2026 | UK Updates

TITLE: UK VAT and Ecommerce Update for Amazon and Shopify Sellers — Week of 19 October 2026

For the week beginning 19 October 2026, the key message for UK Amazon and Shopify sellers is to focus on accurate marketplace reconciliation and prepare early for the next VAT filing deadline. No new UK VAT rule specifically for Amazon or Shopify sellers was confirmed in the official guidance reviewed for this week. The established rules still matter, and clean records now can prevent a last-minute scramble later.

Check your VAT deadline before the week gets away from you

If your VAT quarter ended on 30 September 2026, your return and payment will normally be due by 7 November 2026. That date falls on a Saturday. Some payment methods need time to clear, so check the payment instructions in your HMRC VAT account and arrange payment by Friday 6 November if your method will not clear over the weekend.

Your own VAT return period may differ. Confirm the deadline shown in your VAT online account rather than relying on a standard quarterly example. HMRC explains the usual VAT return and payment deadlines and ways to pay a VAT bill.

Use this week to match your sales data, refunds, fees and VAT records. That gives you time to investigate differences before submitting and paying.

Reconcile marketplace settlements to sales, not just cash received

An Amazon or Shopify payout is not the same as your sales figure. Platforms and payment providers may deduct fees, refunds, advertising charges, reserves or other adjustments before money reaches your bank account. Booking only the net payout can understate sales and make costs harder to track.

For each sales channel, gather records that show:

• Gross orders and sales by date
• Discounts, refunds, returns and chargebacks
• VAT charged and any marketplace-collected VAT
• Selling, fulfilment, payment processing and advertising fees
• Payouts, reserves, adjustments and currency conversions

For Amazon FBA, include fulfilment and storage charges, reimbursements, removals and inventory movements. For Shopify, reconcile orders against payment-provider reports and bank deposits. Keep the underlying reports, not just a summary of the transfer.

This is the foundation of reliable ecommerce bookkeeping UK sellers can use for VAT returns, year-end accounts and practical cash-flow tracking. It also helps you spot a missing payout or unexpected fee before it distorts your profit figures.

Treat VAT correctly across every sales channel

Marketplace VAT can be complicated because who accounts for VAT can depend on the transaction, the seller’s location, where goods are held and the marketplace’s role. Don’t assume that a VAT line on a settlement report means the whole sale has been handled for you, or that the same VAT should be declared twice.

Keep a transaction-level trail that identifies the sales for which a platform accounts for VAT and the sales for which your company remains responsible. Check the relevant marketplace reports and supporting invoices against your accounting records. HMRC’s guidance on selling goods through an online marketplace explains that the treatment depends on the circumstances of the sale.

For Shopify sellers, review your checkout settings alongside your fulfilment locations and product tax settings. A store’s address alone does not establish the correct VAT treatment for every order. If you ship from different locations or sell internationally, retain the data needed to explain how each transaction was treated.

This is where Shopify accounting UK businesses rely on needs to connect sales, payments and tax records, not simply import a single payout total.

Keep an eye on the VAT registration threshold and stock locations

For a UK-established business, VAT registration is generally required if taxable turnover exceeds £90,000 in a rolling 12-month period, or if you expect it to exceed £90,000 in the next 30 days. The test concerns taxable turnover, not profit or the cash remaining after marketplace fees. Check the detailed HMRC VAT registration rules, including how the registration deadline and effective date are determined.

A seller based outside the UK should not assume the UK-established business threshold applies in the same way. HMRC says businesses based outside the UK that make, or expect to make, certain supplies to the UK may need to register regardless of turnover. If you use Amazon FBA or another fulfilment service, record where your inventory is stored and review whether those locations create VAT registration and filing obligations.

For amazon fba accounting UK sellers, an up-to-date inventory-location record is therefore part of compliance, not just stock control. When stock moves between countries, keep the movement reports and check the registration and reporting requirements for each relevant jurisdiction.

Keep Making Tax Digital records connected

VAT-registered businesses should keep digital VAT records and submit VAT Returns using compatible software under Making Tax Digital for VAT. HMRC’s Making Tax Digital for VAT guidance explains the continuing requirements.

Check that your accounting process preserves digital links from platform data through to your VAT return. Re-keying totals between disconnected spreadsheets and systems can create errors and make it harder to trace how a return figure was calculated.

One separate point for business owners: Making Tax Digital for Income Tax is not a new VAT requirement for a UK limited company. From 6 April 2026, it applies to qualifying individuals with more than £50,000 of qualifying income from self-employment and property, subject to the rules. If you have a separate sole-trader business, check the latest HMRC guidance on signing up. Do not confuse an individual’s Income Tax obligations with the limited company’s VAT and Corporation Tax responsibilities.

Use the numbers to make growth more sustainable

A stronger sales week does not always mean a stronger cash position. Rising orders can also mean more stock purchases, returns, advertising spend and VAT due. Review channel performance using figures that account for the full cost of making and fulfilling sales.

Track these measures regularly:

1. Net sales after refunds and discounts to see what customers actually kept.
2. Marketplace and payment fees to understand the cost of each channel.
3. Gross margin by product or product group to identify what contributes to profit.
4. Inventory held and in transit to make purchasing decisions with better visibility.
5. VAT collected, recoverable VAT and expected payment dates to avoid treating tax funds as available working capital.

A dependable amazon seller accountant UK service or ecommerce accountant UK process should connect day-to-day records with VAT calculations, filings and year-end accounts. At Sterlinx Global, the operating model