The ATO has released their Practical Compliance Guidelines (PCG) 2024/1, outlining their compliance approach and risk assessment in relation to Intangible Migration Arrangements.

What is an Intangible Migration Arrangement?

They are arrangements involving the movement (or migration) of intangible assets between related entities, particularly across international borders.  For example, transferring patents and IP to low tax jurisdictions or the use of IP without royalty payments being made.

Despite the name, the PCG still applies to taxpayers even if there has been no movement of intangible assets.

Risk assessment frameworks

Taxpayers are required to self-assess their intangible arrangements under the PCGs Risk Assessment Framework (RAF) 2 tables. Similar to other PCG’s the ATO outline a set of parameters in tables which require the taxpayer to consider resulting in a risk zone rating (green for low to red for high).

Table One assesses the compliance risk in relation to a Migration of intangible assets. Whilst RAF Table Two assesses the compliance risk associated with Australian activities connected with intangible assets held overseas.

These tables will result in a risk rating (green to red), the rating will influence the probability of the ATO allocating resources to conduct a review. Where taxpayers have higher risk ratings, the expectation is that they will have increased levels of documentation and evidence.

The PCG is broadly applicable and is expected to affect the majority of taxpayers involved in related-party offshore Intangible Arrangements. Taxpayers will be required to collate relevant evidence at the inception of arrangements as well as maintaining the appropriate level of documentation to support their positions.

Should you have any questions about how these changes will impact you, please reach out to your Engagement Partner.