The Australian Tax Office has updated its transfer pricing compliance guideline for inbound distributors, refreshing profit benchmarks to reflect current market conditions and introducing a new "white zone" for lower-risk taxpayers — with effect from 22 April 2026.

RF Report

The Australian Tax Office (ATO) has published updates to Practical Compliance Guideline PCG 2019/1 on transfer pricing issues related to inbound distribution arrangements to ensure profit markers remain relevant and aligned to more recent market performance for assessing transfer pricing risk on 22 April 2026.  Multinationals undertaking inbound distribution should review this guidance.

The ATO has also clarified the scope of the application of the guideline and reportable tax position schedule by introducing a “white zone” for certain taxpayers.

For taxpayers in the white zone, such as those who recently obtained high assurance for their transfer pricing, the ATO won’t apply compliance resources to further review the transfer pricing outcomes of inbound distribution arrangements, other than to confirm ongoing consistency with the agreed approach.

This guideline applies to income years ending after 22 April 2026 and covers both existing and new inbound distribution arrangements.

Multinationals undertaking inbound distribution should review the framework set out in this guideline to:

  • assess the transfer pricing risk of your inbound distribution arrangements
  • understand the compliance approach we are likely to adopt given the transfer pricing risk profile of your inbound distribution arrangements
  • work with us to mitigate the transfer pricing risk of your inbound distribution arrangements and be confident you have reduced your risk exposure, and
  • understand the type of analysis we use when assessing the transfer pricing risk of your inbound distribution arrangements.

Structure of this Guideline

This Guideline is structured as follows:

  • The main body sets out general principles relevant to the framework for assessing transfer pricing risk and applying compliance resources to inbound distribution arrangements to which the Guideline applies.
  • The Schedules set out quantitative and qualitative indicators relevant to distributors generally or based on their industry sector, including those that operate in the life science, information and communication technology (ICT) and motor vehicle industries.

This Guideline does not provide advice or guidance on the technical interpretation or application of Australia’s transfer pricing rules or other tax provisions.

Inbound distributors

For the purposes of the risk assessment framework set out in this Guideline, inbound distributors are intermediaries in the distribution channel or supply chain that resell products to retailers, merchants, contractors or industrial, institutional or commercial users. Their focus is on selling business to business, rather than to household consumers. An inbound distributor may have some retail operation, but their primary sales channel is not their own retail activity.

In relation to tangible goods, an entity is considered an inbound distributor for the purposes of this Guideline if:

  • The business comprises the distribution of goods purchased from related foreign entities for resale to third parties, and
  • The entity or its related entities do not significantly contribute to the creation (including manufacture or alteration) of the goods in Australia.

In relation to digital products or services, an entity is considered an inbound distributor if:

  • the business comprises selling on its own behalf digital products or services to third parties, and any intellectual property relating to those products or services is substantially held by related foreign entities, and
  • the entity or its related entities do not significantly contribute to the creation (including alteration) of the digital products or services, or the intellectual property in the digital products or services, in Australia. For example, an entity significantly contributes to the creation of digital products or services if it or its related entities own or operate significant equipment in Australia used to host or provide the products or services being sold or distributed.

A distributor earns a gross profit from the difference between the price at which the goods are sold and the price paid. A distributor will typically incur various selling and administrative costs that must be covered by this gross profit in order for it to make a net profit.