Intangibles Migration Arrangements include:

a) The movement or transfer of Intangible assets out of Australia, for example:

• Transferring your Australian‑developed software IP to a related party in another country
• Moving your brand ownership to a foreign affiliate
• Restructuring your Group business operations (i.e. business in multiple countries) that results in a foreign entity controlling or benefiting from your Australian-developed IP.

b) Australia does important work, but the value isn’t recognised by Australia, for example:

•                Your Australian team does R&D, product development or branding work
•                But the IP is legally owned offshore
•                And Australia does not get a fair compensation

 This situation is considered a risk because it might mean Australia does not receive its fair share of taxable profits.

This PCG sets out how the ATO will administer tax law when taxpayers follow the guideline in good faith. The Commissioner commits to this practical compliance approach, providing certainty for compliant taxpayers. ATO’s focus areas on the compliance approach include:

•                Nature and value of the intangible asset transferred, moved/centralised or restructured
•                Transfer pricing methodology applied
•                Commercial and economic substance supporting the arrangement

The PCG introduces a point-based risk assessment framework that assigns arrangements to specific risk zones to assist the ATO to identify the level of risks on a taxpayers intangible arrangements:

•                Green: Low risk, unlikely review
•                Blue / Amber: Medium risk, may attract some questions
•                Red: High risk, likely review
•                White: Reviewed previously (given a low-risk or high-assurance rating and require no further assessment)

Taxpayers must maintain comprehensive documentation in relation to their intangible arrangements. Proper evidence supports low-risk classification and compliance certainty. Evidence the ATO expects (Key Documents):

•                Commercial rationale for the arrangement
•                Identification of intangible assets
•                DEMPE (i.e. (Development, Enhancement, Maintenance, Protection, Exploitation) functional analysis
•                Legal agreements
•                Financial and profit allocation analysis
•                Related documentation - TP reports and CbC reporting

Here’s why this guideline is important:

•                Many multinational groups rely heavily on IP
•                The ATO sees IP as a major tax risk area
•                PCG 2024/1 tells companies what the ATO expects so they avoid audits
•                It forces companies to maintain robust transfer pricing documentation.

Essentially, if your company deals with IP across borders, this PCG provides guidelines on the risk zones your IP arrangements fall within. The PCG also outlines ATO’s expectation of the required documentation.

By following the PCG, you reduce your risk of tax adjustments, penalties, and lengthy reviews, while also giving your leadership team confidence that the business is managing tax risks around IP.

Taxpayers may be required to report their risk rating for each intangible migration arrangement, particularly where a Reportable Tax Position (RTP) Schedule applies. While it remains good practice to use the guideline to assess the risk of all migrations, the ATO does not generally require taxpayers to report risk ratings for historic arrangements that fall outside the timeframe specified in the RTP instructions. However, these earlier migrations are not exempt from review. The ATO may still examine them, and taxpayers must ensure they maintain robust evidence and documentation to support their positions.