TITLE: ATO and Tax Changes: Foreign Resident CGT, Software Royalties, Card Payments, and Return Timing
Act early on large foreign resident transactions
The new foreign resident capital gains tax notification rules started on 1 October 2026.
They apply where a foreign vendor provides a non-indirect Australian real property interest (non-IARPI) declaration and the transaction, together with any related transactions, has a value of $50 million or more.
The vendor must notify the ATO using the approved form:
- At least 28 days before settlement where the settlement period is more than 31 days.
- As soon as practicable after the transaction begins where the settlement period is 31 days or less.
- The vendor must also notify the purchaser in writing before settlement that the ATO notification has been completed.
This requirement is important because the purchaser cannot rely on the non-IARPI declaration if the notification steps are not completed correctly. The purchaser may then need to withhold 15% of the purchase price.
On a $50 million transaction, that could mean withholding exposure of up to $7.5 million.
The rules may also apply to contracts signed before 1 October 2026 where settlement occurs on or after that date. Review the settlement timetable rather than relying only on the contract signing date.
The approved ATO form is detailed. It may require formal valuations of taxable Australian real property and non-taxable Australian real property assets. Build this work into the transaction timetable early.
Read the ATO guidance on strengthening the foreign resident CGT regime and its information on foreign resident capital gains withholding vendor declarations.
Map every cross-border software payment
The ATO issued final Taxation Ruling TR 2026/2 on 4 September 2026. The ruling explains when payments under software intermediation arrangements can be treated as royalties for Australian income tax and royalty withholding tax purposes.
Do not assume that the contract label determines the outcome.
The ATO’s position can apply even where:
- The agreement is called a distribution agreement.
- The contract describes payments as royalty-free.
- The intermediary only issues licence keys.
- The intermediary only provides download instructions.
- The Australian entity operates as a buy-sell distributor.
- The arrangement is described commercially as a subscription, service, or platform fee.
The substance of the rights matters. Payments may be treated as royalties where the arrangement involves rights connected with software copyright or intellectual property, including reproduction, communication, adaptation, sublicensing, or similar rights.
For buy-sell distributors, royalty withholding tax may apply to gross payments, not simply to the distributor’s profit margin.
The ruling applies retrospectively to payments made before and after its issue date, subject to limited transitional circumstances. Consultation on the accompanying draft Practical Compliance Guideline PCG 2026/D4 closed on 2 October 2026. The ATO has indicated that the 75% residual threshold will be confirmed after the consultation process.
Complete the following review now:
- List every payment from your Australian entity to offshore software, technology, platform, and IP suppliers.
- Identify the legal entity receiving each payment.
- Compare the commercial description with the actual rights granted.
- Check whether the arrangement involves distribution, hosting, copying, adaptation, sublicensing, or licence-key access.
- Review whether withholding tax has been considered and documented.
- Quantify possible historical exposure.
- Keep a written record of your position and supporting documents.
You can review TR 2026/2 on the ATO Legal Database and the ATO’s software royalties guidance.
Replace credit card payment processes before 30 November
The ATO will stop accepting direct credit card payments for tax bills after 30 November 2026.
This affects payments such as:
- Business activity statements.
- GST liabilities.
- PAYG instalments.
- Income tax.
- Other ATO account debts.
- Payment plans linked to a credit card.
Update your payment method before the next instalment falls due. Available alternatives include BPAY, direct debit from a bank account or debit card, electronic funds transfer, and other payment channels listed by the ATO.
Do not leave this until the payment date. A failed instalment may push a payment plan into arrears or default.
Review your accounting software, finance team instructions, payment approvals, and recurring payment arrangements. Make sure the payment reference number is used correctly so the ATO allocates the payment to the right account.
See the ATO’s announcement about ending credit card payments and its online payment options.
Do not rush tax returns before the data is complete
The ATO has reported that more than 595,000 tax returns have been adjusted through its data-matching processes.
Taxpayers who lodge very early are around twice as likely to have their returns adjusted. Pre-fill information may not yet include all income, interest, dividends, employment information, government payments, or other third-party data.
Before lodging, check:
- ATO pre-fill information.
- Bank interest and dividend records.
- PAYG payment information.
- Digital platform and marketplace income.
- Foreign income and withholding.
- Business income and deductions.
- Private-use adjustments.
- Motor vehicle and home-office records.
- Crypto and investment transactions.
For ordinary self-lodgers, 31 October 2026 falls on a Saturday. The next business day, Monday 2 November, may apply under the usual weekend rule for ordinary self-lodgment.
However, tax agents should not rely on that date for every situation. The ATO has stated that new clients must be added and overdue prior-year returns must be lodged by 31 October 2026 for the agent to access the later lodgment program dates.
