Introduction

On 24 September 2025, the Commissioner released Practical Compliance Guideline (PCG) - PCG 2025/3: Capital raised for the purpose of funding franked distributions – ATO compliance approach^[1] (Final PCG), which provides the Commissioner’s view on how Australian Taxation Office (ATO) compliance resources will be applied with respect to the equity funded distributions rule contained in Section 207-159 of the Income Tax Assessment Act 1997 (Cth)^[2] (ITAA 1997).

The Final PCG comes after the release of the draft PCG^[3] in December 2024 (Draft PCG) and extensive consultation with industry. The issues raised during consultation, and the Commissioner's response to those issues in the Final PCG, have been published in a compendium.^[4]

Background

Section 207-159: The Equity Funded Distributions Rule

Where it applies, the equity funded distributions rule deems distributions (which are outside of a company’s regular pattern of distributions) to be unfrankable where they are seen to be funded directly or indirectly by issuances of equity interests.

This integrity rule has its history in Taxpayer Alert TA 2015/2,^[5] which highlighted the Commissioner’s concerns with arrangements where funds from the issuance of equity interests were used to fund once-off franked dividends. The perceived mischief in these arrangements was the artificial acceleration of the release of franking credits to shareholders, with no material change to the financial position of the company.

In a somewhat surprising move, this rule was released in exposure draft form in September 2022^[6] and, following multiple rounds of public consultation,^[7] enacted in November 2023^[8] with effect to distributions from 28 November 2023.

Broadly, the rule applies to deem a distribution to be unfrankable where:

• A distribution (including dividends and distributions on non-share equity) is not in accordance with "established practice.” This means that special dividends are generally caught, as are larger than normal ordinary dividends;
   
• There is an issue of equity interests (in any entity) before, at, or after the distribution is paid; and
   
• The issue of equity interests has the principal effect and non-incidental purpose of directly or indirectly funding a substantial part of the distribution.

There is also a carve-out such that the integrity rule will not apply where the issue of equity interests is a “direct response” to relevant regulatory requirements (e.g., the Australian Prudential Regulation Authority (APRA) or Australian Securities and Investments Commission requirements).

Although the rule is intended to apply to “artificial” and “contrived” arrangements,^[9] and despite successive rounds of public consultation which did narrow the scope of its potential application, the rule as enacted is extremely broad and its reach goes far beyond the mischief at which it was originally targeted.

Amongst other reasons, this is because:

• There is no requirement that the equity interests be issued by the entity paying the distribution or even an associate of that entity;
   
• The “principal effect” requirement requires taxpayers to trace distributions, leaving taxpayers with a very high evidentiary burden;
   
• Unlike other integrity rules, the rule does not require there to be a purpose of obtaining a tax benefit or imputation benefit—so none of the parties need to have the purpose of giving shareholders a tax or franking credit benefit. The non-incidental purpose of an issue of equity interests funding a substantial part of a relevant distribution is enough to satisfy the purpose requirement;
   
• The integrity measure is both backward and forward looking, in that it can be enlivened by both past and future equity issuances, i.e., if there are equity raisings which occur following the distribution and those funds indirectly fund the distribution, the distribution could later be deemed unfrankable; and
   
• The rule is self-executing. That is, there is no Commissioner’s discretion in whether it applies (unlike other franking credit integrity rules such as section 177EA of the Income Tax Assessment Act 1936 (Cth) (ITAA 1936)).
   

The Draft PCG and Final PCG

The PCG is generally helpful for taxpayers looking to self-assess the risk of the rule applying to their arrangements. Replicating the approach in other PCGs, the PCG does this by identifying scenarios as “green zone” (low risk)—in which the Commissioner will generally not apply compliance resources—and “red zone” (high risk)—in which the Commissioner is likely to apply compliance resources, including review or audit.

The “green zone” brings some welcome safe harbours for common commercial arrangements including:

• Distributions that are consistent with past practice over the prior three years, i.e., consistent timing, consistent amount (including consistent pay-out ratio or percentage of free cash flow), and consistent franking percentage;
   
• Distributions that are made under dividend reinvestment plans (DPRs) for normal commercial purposes. (Given the function of a DRP, there was a concern that all DRPs would be caught under this integrity rule);
   
• Distributions that are funded less than 20% (directly or indirectly) by issuances of equity interests;
   
• The issue of equity interests by entities that are regulated by APRA to meet minimum regulatory requirements or maintain a reasonable buffer to these requirements; or
   
• The payment of pre-sale dividends by private companies to facilitate the departure of one or more shareholders in an M&A context.

Conversely, taxpayers will fall within the “red zone” and will likely be subject to further review and audit where all of the following apply:

• There is a close alignment in the timing (for example, less than 12 months) between an issue of equity interests and the declaration or payment of the relevant distribution;
   
• The distribution is a special dividend or is unusually large when compared to dividends paid within the prior three years (having regard to payout ratio or percentage of free cash flow, and where there has not been an increase in the company's profit that aligns with the special dividend or unusually large distribution); and
   
• One or more the following factors (relevant to the principal effect and purpose of funding a substantial part of the distribution) applies:
   
  • There is an absence of evidence for a clear and genuine commercial purpose (other than releasing franking credits) for the features of the arrangement;
     
  • There is no, or minimal, change in the financial position of the entity as a result of the arrangement;
     
  • Most of the funds raised by the equity issuance are used to fund (directly or indirectly) the relevant distribution; or
     
  • The distribution forms part of an artificial or contrived arrangement designed to facilitate the release of franking credits.

Examples are also provided for scenarios that neither fall into the “green zone” nor the “red zone.” In these circumstances, the Commissioner’s guidance is to maintain adequate records and documentation to substantiate the position that the integrity rule doesn’t apply.

There is also a “white zone” that is available when the arrangement is validly subject to a private or class ruling.
 

A&M’s Analysis

In general, the PCG has clearly benefitted from the extensive consultation already undertaken in respect of the integrity rule, and provides a number of clear practical examples, which build on the existing guidance provided by the Explanatory Memorandum^[10] and Supplementary Explanatory Memorandum.^[11] The increased certainty provided by the number of “green zone” examples and effective safe harbours is certainly welcome and positive (particularly in the context of what was intended to be a targeted integrity rule).

Overall, changes to the Final PCG from the Draft PCG are insubstantial. When compared to the Draft PCG, the Final PCG introduces expanded safe harbours, clarifies distribution apportionment and the “established practice” requirement and offers additional guidance on evidence that taxpayers may use to demonstrate that the integrity rule doesn't apply.

However, there has been no movement in other areas that would have been of great benefit to many taxpayers (and administrators) in providing flexibility to structure very common commercial arrangements without fear of the integrity rule applying. In particular, there are some significant missed opportunities for the Commissioner to provide additional certainty on common commercial arrangements and reduce the need for and complexity of ruling processes. A key example of this is pre-sale dividends paid in the context of public M&A, which are not blessed as “green zone” in the Final PCG, despite private M&A pre-sale dividends being generally accepted to be “green zone.”

These missed opportunities to ease taxpayers' compliance burden are particularly disappointing in the context of a widely drafted, self-executing integrity rule that will not apply in most cases and which, despite its very broad drafting, is intended to apply to “contrived” and “artificial” arrangements.

This means that, despite the existence of far more “green zone” examples than “red zone” examples in the Final PCG, most taxpayers will not be covered by a “green zone” example and will need to work through this integrity rule (and many others) in detail when simply trying to distribute profits to shareholders, even when their arrangements are far from “artificial” or “contrived.”
 

The following are A&M’s detailed observations on the Final PCG:
 

1."Substantial part" of franked distribution increased from 5% to 20%

One of the requirements for the integrity rule to apply is that the "principal effect" of the equity raising must be to fund a "substantial part" of the relevant distribution. The Draft PCG interpreted "substantial part" as being 5% or more of a relevant distribution. In response to public consultation, the Commissioner increased the threshold to 20%; that is, if an equity raising funds less than 20% of a franked distribution, the arrangement will be "green zone," and the Commissioner will generally not apply compliance resources. This is good news as it will effectively reduce the tracing burden for taxpayers, albeit not substantially. 

With respect to “principal effect,” the intent is for the test to be similar to that which is included in the general anti-avoidance rule in Division 165 of the GST Act,^[12] which is explained for the purposes of that Act as “an important effect, as opposed to merely an incidental effect.”^[13]

The Final PCG clarifies that the amount of the distribution that is unfrankable is limited only to the portion directly or indirectly funded by the capital raising. Where the “principal effect” of the capital raising is to fund the entire distribution, the entire distribution will be unfrankable. Conversely, if the “principal effect” of the equity issue is to fund a substantial part of the distribution, the amount of the distribution that is unfrankable will be determined in proportion to the part of the distribution funded by the equity issue.^[14]

2. Equity raising for specific purposes and pause of dividends

The Final PCG includes only one new example as compared to the Draft PCG, being new Example 12. In this example, due to economic conditions an ASX-listed company raises equity for the explicit purpose of funding debt repayments, ceases dividends for several years, and once conditions improve, recommences paying franked dividends in accordance with its previous dividend policy.

While the inclusion of this new example reflects a common scenario and is good news, unfortunately, the Commissioner has not deemed this example to be "green zone" and has merely stated that given the purpose of the equity raising (as evidenced by ASX announcements, the equity raising prospectus, annual reports, meeting minutes, and announcements on its website) the integrity rule should not apply.

Without blessing this example as "green zone", Example 12 does not provide much additional practical comfort to taxpayers, except to underscore that documenting the purpose of capital raisings and the source of distributions will remain critical in ensuring that the integrity rule does not apply.

3. No "green zone" example for pre-sale dividends in public M&A

The Draft PCG included an example^[15] of a pre-sale dividend paid in the context of a private equity acquisition of a private company, where the pre-sale dividend was partially funded by funds raised by the acquirer and loaned to the target (and, as is often the case in pre-sale dividend scenarios, the target would not have had sufficient funds to pay the pre-sale dividend without the equity issuance and loan arrangement from the acquirer).

The Commissioner blessed this scenario as "green zone" on the basis that the principal effect and purpose of the capital raising was to facilitate the departure of a target shareholder, not to fund the franked dividend.^[16]

The inclusion of this example in the PCG is warranted because, despite this scenario being very common, as the purpose and effect of the acquirer’s equity raising is to fund the pre-sale dividend, in practice all of the requirements of the rule could be met to deem the pre-sale dividend to be unfrankable (thereby significantly eroding the value proposition for exiting target shareholders). Given the forward-looking nature of the integrity rule (i.e., being triggered by future issuances of equity interests), the rule could also apply where third-party or related-party debt is used to fund a pre-sale dividend, which is subsequently refinanced with funds from an equity issuance (including an equity issuance undertaken following completion).

Unfortunately, despite vocal submissions during the public consultation period, the Commissioner has not extended this pre-sale dividend "concession" to public M&A, on the basis that the Explanatory Memorandum makes a one-line reference to the integrity rule not affecting family or commercial dealings of private groups.^[17] However, the Compendium states that this does not mean that public M&A pre-sale dividends will be high risk and also suggests that taxpayers should obtain private or class rulings on the application of the integrity rule.

This is disappointing, given the same commercial rationale also exists in public M&A, and there is no apparent legislative basis nor policy rationale for making a distinction between public and private M&A.

This means that in public M&A, the current practice of adding this integrity rule to the long list of issues on which a class ruling is sought and seeking representations about and contractual protections around the use of equity raising funds and the source of funds for a pre-sale dividend, will continue. Given the frequency with which pre-sale dividends are used to facilitate M&A, this is a significant missed opportunity for the Commissioner to provide a high level of practical comfort to taxpayers undertaking commercial M&A activities. At the very least, the inclusion of an additional "green zone" example on public M&A would have made ruling processes far more efficient, particularly as in most of these pre-sale dividend scenarios there is no mischief of the type at which the integrity rule is targeted.

It is also worth noting that even if a class or private ruling is sought in respect of a particular distribution, given the forward-looking nature of the equity funded distributions rule, such rulings are often qualified by assumptions that future equity raisings will not directly or indirectly fund a relevant distribution. That is, given the forward-looking nature of the rule, taxpayers’ practical ability to rely on rulings may be more limited—notwithstanding that such arrangements may be “white zone” (no need to consider your risk rating) under the Final PCG.

In private M&A, and despite the inclusion of a “green zone” example on pre-sale dividends, it will not all be smooth sailing. For example, in a private M&A scenario, a loan provided by the buyer to the target to fund the pre-sale dividend may not strictly be a “debt interest” for tax purposes. In fact, the loan may be classified as equity for tax purposes with reference to its terms. (This could occur, for example, where the loan has conversion or other unique features.) In this situation, the loan itself may involve a relevant issue of “equity interests” that has the non-incidental purpose and principal effect of funding the pre-sale dividend, thereby triggering the integrity rule.

In these circumstances, the arrangement would not fall neatly within the “green zone” per the Final PCG, and detailed analysis of the application of the integrity rule would be required.

4. Large gulf between "green zone" and "red zone" continues

While the Final PCG includes eight “green zone” examples and only two “red zone” examples (which hopefully reflects the Commissioner’s interpretation that the integrity rule should not apply in the vast majority of circumstances), there still is a large gulf between the two risk zones, and many taxpayers will fall outside of the fairly narrow “green zone” but will not exhibit each of the factors relevant to being in the “red zone."

While it is helpful that many scenarios will not fall within the “red zone” category, we consider that many taxpayers will have arrangements which fall in a “no man’s land” (i.e., not within either category).

That taxpayers will fall in the "no man’s land" is effectively acknowledged by the Commissioner in Example 11 and new Example 12 of the Final PCG, in which the Commissioner states that the relevant taxpayer is neither in the green nor the red zone, but as the taxpayer is able to demonstrate the commercial purpose of the equity issuance and the use of funds by reference to documentation such as the ASX announcements and its annual reports, the integrity rule should not apply.

However, particularly in the context of a self-executing rule that does not require the Commissioner to exercise a discretion in order to deem a distribution unfrankable, it is disappointing that a significant portion of taxpayers and their commonplace arrangements will not clearly fall within either zone.

Despite these issues being raised in consultation, the Commissioner has not addressed that there is a large gulf and some asymmetry between the "green zone" (low risk) and "red zone" (high risk), noting that it is not possible to cover all commercial scenarios. While this is of course true, the inability of many taxpayers to effectively self-assess their risk significantly reduces the intended administrative benefit of the PCG.

From an ongoing compliance perspective, consistent with prior PCGs, a self-assessment rating under the Final PCG is likely to be a new requirement in the Reportable Tax Positions schedule (2026). Taxpayers should document their positions to support positions taken in respect of the integrity rule, and it would be prudent to include this additional requirement in tax return procedure documents as well as any scoping for compliance reviews going forward.

5. Interaction of the integrity rule with the DDCR

As noted above, one of the requirements of the integrity rule is that the “principal effect” of the equity issuance is the funding of a relevant distribution. The integrity rule therefore effectively requires taxpayers to trace the sources of funds of their distributions.

Unfortunately, this rule is not the only integrity rule to focus on the funding source of distributions. In particular, the new debt deduction creation rule (DDCR) enacted as part of the new thin capitalisation rules in Subdivision 820-EAA of the ITAA 1997 denies deductions on "associate pair” debt (broadly, related-party debt) where that debt is used to fund or facilitate distributions to “associate pairs”.^[18] The DDCR applies to deny debt deductions on and from 1 July 2024 and applies to all “general” and “financial” class investors under the thin capitalisation rules (but not to ADIs or certain securitisation vehicles, or taxpayers that have elected to rely on the third-party debt test (TPDT) for thin capitalisation purposes).

Relevantly, these two new rules both examine the funding source of a distribution. In particular:

• The equity funded distributions rule means that dividends and other distributions will be deemed unfrankable where they are funded from the proceeds of issuing equity interests (and the other requirements of the rule are met); and
   
• The DDCR means that “associate pair” debt will not be deductible to a taxpayer where it is used to fund or facilitate the funding of a distribution to that, or another, “associate pair.”

The combined effect of these two rules (and others, see comments on the TPDT below) is to significantly limit the sources from which it might be commercially feasible to fund dividends and other distributions. Practically, these rules require complex tracing and identification of whether a dividend has been sourced from “good” or “bad” funds, which results in a very high evidentiary burden for taxpayers. The practical difficulties of tracing the source of distributions have long been felt by taxpayers in the context of other integrity provisions, such as section 45B of the ITAA 1936. 

Notably, in September 2025, the Commissioner finalised PCG 2025/2 – Restructures and the thin capitalisation and debt deduction creation rules – ATO compliance approach (PCG 2025/2),^[19] being the Commissioner’s first guidance product on the DDCR. In PCG 2025/2, the Commissioner explicitly states that taxpayers are expected to trace when applying the DDCR, that tracing is a factual exercise, and that taxpayers should not claim debt deductions unless they have sufficient evidence to support that DDCR does not apply. PCG 2025/2 also provides limited options in terms of fair and reasonable apportionment or alternatives to tracing (although in response to industry consultation, the final version of the PCG 2025/2 does include some examples to address how to fairly and reasonably identify disallowed debt deductions and how to fairly and reasonably apportion debt used for multiple purposes).

However, PCG 2025/2 does not address what a taxpayer must do if apportionment cannot be undertaken on that basis—and therefore sets a very high bar for demonstrating the “use” of funds.

Similarly to the equity funded distributions rule, the DDCR is adding complexity to pre-sale dividends in the M&A context. This is because the DDCR applies to deny debt deductions where a taxpayer:

• “Uses” a financial arrangement it has (at any time) to fund (or facilitate funding) a payment or distribution to an "associate pair;” and
   
• Claims debt deductions "in relation to" that financial arrangement which are “referable to” an amount paid to an associate pair.^[20]

Similarly to the equity funded distributions rule, the DDCR is incredibly broadly drafted and does not require a purpose of creating additional debt deductions or obtaining a tax benefit. The DDCR is also self-executing (meaning, again, that no Commissioner's discretion is required in order for debt deductions to be denied).

In the context of pre-sale dividends, as funds used to pay a pre-sale dividend to exiting shareholders (some of whom may be associate pairs) are frequently loaned to the target by the acquirer (who will likely be, at the time of the target’s debt deductions, also an associate pair), the DDCR may be triggered to deny deductions on the target’s related-party debt.

To pick up the earlier example of private M&A, to the extent a loan from the acquirer to the target to fund a pre-sale dividend is debt for tax purposes, the DDCR may operate to permanently deny debt deductions that arise for the target from that financial arrangement.

Similarly to the equity funded distributions rule the DDCR has resulted in the practice of seeking representations that a pre-sale dividend paid by the target will not be funded by “associate pair” debt, but will instead be funded by, for example, existing cash balances or third-party debt.

For entities that are subject to the DDCR, this effectively limits the funding source of pre-sale dividends to existing cash balances and external third-party debt (rather than equity issuances or related-party debt). The above demonstrates that taxpayers participating in otherwise commercial M&A activities can be caught by either (or both) of these rules, and documentation and detailed analysis will be required to prevent adverse tax outcomes.

The recent focus of our tax law on the source of distributed funds and “tracing” can also be seen in the TPDT contained in the new thin capitalisation rules. Similarly to the approach for the DDCR, the Commissioner’s view is that taxpayers who elect to apply the TDPT must trace the use of their third-party debt funds to demonstrate compliance with the requirements of the TPDT, and that the use of third-party debt funds to pay distributions to investors is not a complying use.^[21] That is, taxpayers who rely on the TPDT will face debt deduction denial on third-party debt used to fund distributions (placing another constraint on the funds from which dividends and other distributions can be paid).^[22]

With any luck, the post-implementation review of the thin capitalisation rules provisions that Treasury is due to commence by 1 February 2026,^[23] and the recently announced Red Tape Reduction Review by the Board of Taxation^[24] to be undertaken by the Board of Taxation will examine the broad reach of the DDCR and other rules and make appropriate recommendations to limit (or repeal) their application.
 

Key Takeaways

In our view, given the focus of the equity funded distributions rule and the DDCR on the source of funds distributed to shareholders, it will be crucial for taxpayers to:

• Include clear “use of funds” drafting in equity issuance documentation (e.g., prospectuses and other public documentation) and in loan documentation (i.e., less references to “general corporate purposes” and more specific references to actual intended use of funds);
• Document the use of these funds at board and management level (e.g., resolutions and minutes) and ensure relevant transactions are clearly identifiable in journal entries;
• Wherever feasible, use separate bank accounts to quarantine equity issuance funds, related-party loan funds that will be used for external purposes (i.e., to acquire third party assets, to pay external accounts payable, etc.), and funds that may be used for related-party purposes. This should, at a minimum, assist in apportionment where required;
• Closely monitor and document the source of funds for distributions—there are several examples in PCG 2025/2 that suggest that the funding of dividends is a focus area for the Commissioner in administering the DDCR, and the funding source of franked distributions will always be a relevant consideration under the equity funded distributions rule; and
• Proactively seek tax advice for any new or proposed arrangements involving equity issuances, special dividends, or other changes in distribution patterns and the use of related-party debt, to assess the risk of the equity funded distributions rule or DDCR applying to distributions.

In summary, although the Final PCG for the equity funded distribution rule does narrow the practical application of the integrity rule and provide some relief for taxpayers, complexity and uncertainty remains in the M&A context, particularly in the public M&A space. This effectively adds an additional burden to taxpayers to obtain pre-completion clearance from the Commissioner through class rulings or private binding rulings on additional issues.

Practically, avoiding the application of these two integrity rules will require careful documentation of the purpose of equity raisings, the use of equity raising and debt funds, and, critically, the source of funds distributed or dividended to shareholders (including the tracing of such funds). As noted above, tracing and use of funds documentation will also be critical for entities not subject to the DDCR that rely on the TPDT.

Both the DDCR and the equity funded distributions rule should be considered in parallel when distributing funds to shareholders. Even if a taxpayer is lucky enough to fall within the “green zone” under the Final PCG, there may still be debt deduction denial under the DDCR if a distribution is funded or facilitated by related-party debt.

[1] Australian Taxation Office, “PCG 2025/3: Capital raised for the purpose of funding franked distributions – ATO compliance approach,” September 24, 2025.

[2] Section 207-159 of the Income Tax Assessment Act 1997 (Cth).

[3] Draft PCG 2025/3, December 2024.

[4] Australian Taxation Office, “PCG 2025/3 Compendium,” accessed October 6, 2025.

[5]Taxpayer Alert TA2015/2, May 7, 2015.

[6] Australian Treasury, “Franked distributions and capital raising,” September 14, 2022.

[7] Parliament of Australia, Treasury Laws Amendment (2023 Measures No. 1) Bill 2023 [Provisions], June 2023.

[8] Parliament of Australia, Treasury Laws Amendment (2023 Measures No. 1) Bill 2023 (Cth), November 27, 2023.

[9] Parliament of Australia, “Explanatory Memorandum to Treasury Laws Amendment (2023 Measures No. 1) Bill 2023 (Cth),” para 5.16.

[10] Parliament of Australia, “Treasury Laws Amendment (2023 Measures No. 1) Bill 2023 – Explanatory Memorandum,” November 28, 2023.

[11] Parliament of Australia, ”Treasury Laws Amendment (2023 Measures No. 1) Bill 2023 – Explanatory Memorandum,” April 30, 2024.

[12] Parliament of Australia, “Explanatory Memorandum to Treasury Laws Amendment (2023 Measures No. 1) Bill 2023 (Cth),” para 5.29, November 28, 2023.

[13] Commonwealth of Australia, “Explanatory Memorandum, A New Tax System (Goods and Services Tax) Bill 1998 (Cth), para 6.345.

[14] Paragraph 23, PCG 2025/3.

[15] Example 8, PCG 2025/3.

[16]Item 5, Table 2, PCG 2025/3.

[17] Australian Taxation Office, “2025/3EC – Compendium, Issue No. 2 and Explanatory Memorandum, Treasury Laws Amendment (2023 Measures No. 1) Bill 2023 (Cth),” para 5.45B.

[18] The DDCR also applies to deny debt deductions where “associate pair” debt is used to acquire certain assets from an “associate pair.” However, this article is focused on the impact of DDCR on distributions. Refer Section 820-423A(2) of the ITAA 1997.

[19] Australian Taxation Office, “PCG 2025/2 Restructures and the thin capitalisation and debt deduction creation rules – ATO compliance approach,” September 2025.

[20] “Associate pair” is a new term that was introduced for the purpose of the DDCR. “Associate” takes its definition from Section 318 of the ITAA 1936. “Associate pair” is defined in Section 995 of the ITAA 1997. An entity is an “associate pair” of another entity if either the entity is an associate of the other entity or if the other entity is an associate of the entity.

[21] Australian Taxation Office, “TR 2025/2 Income tax: aspects of the third-party debt test in Subdivision 820-EAB of the Income Tax Assessment Act 1997,” para 122–125.

[22] Taxpayers who elect rely on the TPDT are not subject to the DDCR, refer Sections 820-423A(2)(g) and 820-423A(5)(f) of the ITAA 1997. However, the Commissioner‘s restrictive view of the TPDT means that taxpayers relying on the TPDT will also be required to trace the funds from which their distributions and other payments to shareholders are sourced.

[23] Australian Taxation Office, Treasury Laws Amendment (Making Multinationals Pay Their Fair Share – Integrity and Transparency) Bill 2024,” Clause 4 (Review of operation of amendments).

[24] Australian Board of Taxation, “Red Tape Reduction Review,” September 24, 2025.