Navigating the evolving landscape of international taxation was the focus of PwC’s August 2025 Tax Briefing. In this session, hosts Clementine Thompson and Patricia Muscat, alongside experts Tony Chen, Charlotte Hayden, Clement Lui, Bianca Wood and Andrew Howell, dissected key regulatory developments, compliance strategies, and pivotal case law decisions.
The panel kicked off highlighting a trend in increased reporting and disclosures, including the recent updates to the short form local file, which now requires detailed disclosures around reportable arrangements. This includes documenting internal restructures that could signal potential tax risks or strategic shifts in business operations. Additionally, the new public country by country reporting regime represents a strategic challenge for multinationals, highlighted by Clementine, with private entities in particular needing to tread carefully amidst concerns over increased scrutiny, ultimately shaping how they communicate with their stakeholders.
Amidst global discussions, Pillar Two holds firm. Tony Chen articulated Australia’s continued rollout, reinforcing the ATO’s role in smoothing transitions while keeping the onus of compliance on the taxpayer. Transitioning into this regime not only involves understanding local and international implications, but also necessitates comprehensive planning to integrate Pillar Two’s requirements into existing tax strategies.
Clement Lui explained how the transfer pricing conversation has evolved, with attention now pivoting from mere interest rates to an expansive analysis of debt quantum. Clement outlined key components of the ATO’s recent guidance on debt quantum, which highlights factors that businesses should carefully consider—like group policies and funding requirements—to ensure their debt levels remain defensible under ATO scrutiny.
Australia’s hybrid mismatch rules, which have now been in place since 2019, continue to present challenges to taxpayers. Tony and Charlotte highlighted new disclosures relating to hybrid mismatches in the 2025 Reportable Tax Position Schedule that require significant work to complete.
Another key development is the release of draft Practical Compliance Guideline PCG 2025/D4, concerning the treatment of cross-border software payments—a development Charlotte Hayden delved into, particularly pertinent given the recent PepsiCo ruling dealing with royalties. This guideline is expected to influence how businesses structure their technology agreements and assess their risk profiles in relation to royalty withholding tax.
A significant discussion revolved around the PepsiCo case, brought to life by Bianca Wood and Andrew Howell. The High Court’s decision recognised payments under PepsiCo’s bottling agreement purely as concentrate purchases, not royalties. Andrew detailed the court’s rationale, with the majority’s opinion focusing on the importance of the contractual terms between independent parties.
Bianca Wood reflected on the case’s broader influence. Although a win for PepsiCo, the decision underscored the judiciary’s measured approach to tax cases involving royalty classifications, advising multinationals to craft agreements cautiously to avoid potential tax pitfalls. Andrew and Bianca also anticipated potential shifts in ATO guidelines, encouraging reassessment based on contractual fidelity and substance over form concepts, which may prompt taxpayers to review how their contractual and economic arrangements are structured.