Australia: ATO Draft Taxation consultation closed on Ruling on software royalties

The consultation of the Australian Taxation Office (ATO) regarding the Draft Taxation Ruling Income tax: royalties - character of receipts in respect of software (TR 2021 D4), closed on 23 July 2021. Under the new ruling, the scope of software royalties that are relevant for Australian tax purposes is redefined. The previous treaty TR 93/12 would be withdrawn with effect from 1 July 2021. The ruling contains eight examples, five of which are tax-relevant. The (1) license to reproduce software, (2) license to modify software including access to source code, (4) software distribution agreement conferring the right to enter into end-user license agreements, (5) software distribution agreement conferring the right to enter into cloud services agreements, (7) services ancillary to the modification of software are all considered royalties relevant for taxes. The (3) license for the simple use of software, (6) software distribution agreement not conferring copyright, (8) services ancillary to the simple use of software are not considered tax-relevant royalties.