What this ruling covers
The Australian Taxation Office (ATO) has finalised Taxation Ruling TR 2026/2. The ruling sets out when payments made under software intermediation arrangements are treated as royalties and therefore subject to withholding tax.
The ruling applies to cross-border payments - that is, payments made by Australian residents, or businesses with a permanent establishment in Australia, to non-residents - for the use of, or right to use, software and other intellectual property rights.
Arrangements covered
TR 2026/2 covers the following types of arrangements:
- Software-as-a-service (SaaS) arrangements
- Copyright rights, including reproduction, communication, and adaptation rights
- Technological protection measures
- Embedded software
Rulings replaced
TR 2026/2 finalises draft ruling TR 2024/D1, which itself replaced earlier draft TR 2021/D4 and the longstanding TR 93/12 on computer software. TR 93/12 and TR 2021/D4 have now been replaced by TR 2026/2.
Reliance protection
The ATO confirms that businesses relying correctly on TR 2026/2 will not pay extra tax, penalties, or interest on the matters the ruling covers.
Companion document
A companion document, TR 2026/2EC (the Compendium), is referenced in the ruling. The Compendium may provide additional context on how the ATO considered submissions during the drafting process.
Key actions
- Businesses that make cross-border payments to non-resident software suppliers or IP owners - including SaaS subscriptions or licence fees - are able to read TR 2026/2 on the ATO website to determine whether those payments are royalties subject to withholding tax.
- Existing software or IP arrangements structured in reliance on TR 93/12 or TR 2021/D4 are required to be reviewed against TR 2026/2, as those earlier rulings have been replaced.
- The Compendium TR 2026/2EC is available to read alongside the main ruling for additional context.
- Where there is uncertainty about whether a specific payment to a non-resident is a royalty under this ruling, withholding tax obligations and penalties can apply if royalties are not correctly identified and withheld.
Effective date
The ruling is dated 3 September 2026.
This is a plain-English summary for information only, not legal or compliance advice. Always check the official source or consult a qualified professional.