US tech giants such as X, Apple, Google and Meta this month also urged Trump to take action against Australia over new federal laws and “coercing” them into sacrificing revenue in schemes such as the News Media Bargaining Incentive.
But the ATO has confirmed that it will wait for a High Court appeal that goes before the court this week over the tax treatment of payments made to soft drink maker PepsiCo.
PepsiCo’s sale of its concentrate to Schweppes will inform the ATO’s processes.Credit: AP
The tax office is appealing a decision of the Full Federal Court last year which found that PepsiCo was not liable to pay royalty withholding tax on sales of its soft drink concentrate to Schweppes, which bottles and sells PepsiCo soft drinks in Australia, including Pepsi.
In nutshell, PepsiCo won its appeal last year arguing that it was just selling its sugary concentrate to its local bottler, not any IP rights to its product. Although it related to syrup, not software, the same IP and royalty payment issues are at stake in the ATO’s final legal appeal on the matter.
“The ATO has deferred finalising the software royalty draft ruling pending the outcome of the PepsiCo case,” a spokesman said.
The tax office said the PepsiCo case involves embedded royalties, and the High Court’s findings may provide insights that could influence the final ruling on how royalties apply to software arrangements.
“The ATO is awaiting the High Court’s decision to assess any potential impact on its position before finalising the draft ruling on software taxation.”
The hearing is scheduled to be April 2 – just before Trump is scheduled to unveil sweeping tariff increases across its trading partners. Australia could be targeted if it does not back down on these tax matters and perceived trade barriers.
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