TITLE: Australian Tax Updates September 2026: Software Royalties, Division 296, and DPN Changes
Australia’s tax landscape is moving quickly this week. The ATO has finalised its software royalty ruling, large superannuation funds are working through Division 296 attribution rules, and the Tax Ombudsman is seeking public feedback on Director Penalty Notices.
Whether you operate in Sydney, Melbourne, Brisbane, Perth, Adelaide or Canberra, these updates may affect your withholding tax, reporting, debt-management and record-keeping processes.
Review cross-border software payments after TR 2026/2
The ATO finalised Taxation Ruling TR 2026/2 on Friday, 4 September 2026. The ruling explains when payments connected with software and intellectual property rights are treated as royalties for Australian income tax and withholding tax purposes.
The final ruling retains the core approach taken in the 2024 draft. Payments may be treated as royalties where they are consideration for the use of, or the right to use, copyright or similar intellectual property rights.
This can affect Australian businesses paying overseas software providers, licensors, distributors and platform operators.
The ruling was modified after the 2025 court decision in Commissioner of Taxation v PepsiCo Inc & Anor. The ATO has also issued accompanying draft compliance guidance for software arrangements.
Critics argue that the ATO’s position does not fully reflect OECD guidance distinguishing payments for copyrighted articles from payments for the use of copyright. The final ruling therefore makes contract review and transaction analysis particularly important.
Check these software arrangements now
Review whether your agreements give an overseas supplier or intermediary the right to:
- Reproduce software.
- Communicate or distribute software.
- Modify, adapt or host software.
- Exercise rights normally reserved for a copyright owner.
- Use intellectual property beyond simply purchasing or reselling a finished product.
A pure purchase or distribution arrangement may be treated differently from an arrangement involving copyright rights. If a payment is characterised as a royalty, Australian withholding tax may apply, subject to any applicable tax treaty.
Read the ATO’s software royalties announcement and TR 2026/2.
Action point: create a payment register for all cross-border software, SaaS, cloud, licensing and platform arrangements. This will help you identify potential withholding tax obligations before the next payment cycle.
Prepare for Division 296 attribution differences
Division 296 tax on large superannuation balances begins in the 2026–27 income year. It applies to individuals whose total superannuation balance exceeds $3 million, with a higher tier applying above $10 million.
The headline combined rates can reach:
- Up to 30% on earnings attributed to balances above $3 million.
- Up to 40% on earnings attributed to balances above $10 million.
The measure is designed around earnings rather than simply taxing the underlying superannuation balance. It is also designed around realised earnings, but the practical result depends on how funds calculate and attribute earnings to individual member interests.
This is creating uncertainty for large superannuation funds. Members with similar balances and investment returns may receive different tax outcomes if their funds use different “fair and reasonable” attribution methods.
Keep detailed superannuation records
Funds and trustees should prepare for additional data and reporting requirements. In particular:
- Confirm how earnings are attributed between member interests.
- Review unit pricing and credited-interest methodologies.
- Check how accumulation and pension interests are treated.
- Maintain records supporting the attribution method.
- SMSF trustees should consider whether actuarial or specialist support is required.
The ATO’s Division 296 guidance provides the current framework.
Action point: do not assume that two members with similar balances will receive identical tax outcomes. Obtain the fund’s calculation information and reconcile it with your personal tax records.
Respond to the Director Penalty Notice consultation by 29 September
The Tax Ombudsman has opened a review of the ATO’s administration of Director Penalty Notices.
The consultation is open until 5:00 pm AEST on Tuesday, 29 September 2026. Webinars are scheduled for:
- Thursday, 10 September 2026, from 12:30 pm to 1:30 pm AEST.
- Tuesday, 15 September 2026, from 12:00 pm to 1:00 pm AEST.
- Wednesday, 16 September 2026, from 2:00 pm to 3:00 pm AEST.
The ATO issued more than 84,000 DPNs to directors of approximately 64,000 companies during 2024–25. That represented a 136% increase on the previous financial year.
The review will examine whether the ATO provides adequate information before, during and after issuing a notice. It will also consider how the ATO responds to vulnerability, illness, coerced directorships and financial abuse.
CPA Australia has welcomed independent scrutiny of the process.
Read the Tax Ombudsman’s DPN review and consultation details.
Protect your company from preventable DPN exposure
Directors should:
- Reconcile GST, PAYGW and superannuation guarantee liabilities regularly.
- Check that activity statements and superannuation reporting are lodged on time.
- Escalate unpaid liabilities before they become entrenched.
- Keep evidence of payment arrangements and ATO communications.
- Act quickly if a DPN is received because statutory deadlines can restrict available options.
Maintaining daily bookkeeping and compliance records gives you a clearer view of liabilities before the ATO’s debt-collection process escalates.
Expect more vehicle data matching
The ATO has issued website guidance for its motor vehicle registries data-matching program covering the 2016–17 to 2024–25 financial years.
The program identifies vehicles that were sold, transferred or newly registered at a purchase price or market value of $10,000 or more. The ATO may compare registry information with taxpayer records to identify inconsistencies in registration, reporting, payment and business-use claims.
Data may include:
- Sale price and market value.
- Transaction dates and registration details.
- Vehicle identification information.
- Garage address and intended use.
- Dealer and transaction details.
