The ATO has updated PCG 2017/2, increasing the simplified interest rate for low-level cross-border loans to 5.69% for the 2026–27 income year, up from 4.90% in 2025–26, while maintaining seven simplified transfer pricing record-keeping options for eligible taxpayers.
The Australian Taxation Office (ATO) has released an updated version of Practical Compliance Guidelines (PCG) 2017/2 – Simplified transfer pricing record-keeping options on 4 November 2026 to establish the benchmark interest rate of 5.69% for low-level cross-border loans for the 2026–27 income year. This rate represents an increase from the 4.90% rate applicable in the 2025–26 income year.
Overview & purpose of PCG 2017/2
The ATO’s PCG 2017/2 provides administrative safe harbours for eligible companies, trusts, and partnerships undertaking international related-party dealings. By choosing a simplified option, qualifying taxpayers can reduce transfer pricing documentation requirements and compliance costs. The ATO generally will not allocate resources to review covered transactions, except to verify eligibility.
General eligibility rules across options
To rely on any simplified record-keeping option, a taxpayer must meet the specific criteria of that option as well as several cross-cutting conditions:
- Self-assessment: Taxpayers must self-assess that their related-party transactions comply with arm’s length transfer pricing rules.
- No sustained losses: The entity must not have reported tax losses for 3 consecutive income years.
- No restructures: The entity must not have undergone a business restructure within the income year that transferred assets, functions, or risks.
The 7 simplified record-keeping options
1. Small taxpayers
Available to Australian economic groups with annual turnover below AUD 50 million. Combined related-party royalties, licence fees, and R&D dealings must not exceed AUD 500,000, while specified service dealings must not exceed 15% of turnover. Excludes distributors, international related-party financial transactions, and capital dealings.
2. Distributors
Available to wholesale distributors classified under the ANZSIC Wholesale Trade code, with group turnover below AUD 50 million. They must maintain a weighted three-year average profit-before-tax ratio of at least 3%. Combined royalties, licence fees, and R&D dealings must not exceed AUD 500,000.
3. Low value adding intra-group services
Covers supportive, non-core services such as administration, IT, and accounting. Eligibility requires meeting either the AUD 2 million de minimis threshold or the applicable 15% of group expenses or revenue threshold. Service expenses must not exceed 25% of profit before intra-group service charges. The cost mark-up must be 5% or less for services received and at least 5% for services provided.
4. Low-level inbound loans
The Australian economic group’s combined cross-border loan balance must not exceed AUD 50 million at any time during the financial year. For 2026–27, the interest rate must not exceed 5.69%. The loans and associated expenses must be denominated in Australian dollars.
5. Materiality
Available to groups with turnover of AUD 100 million or less, where international related-party dealings represent no more than 2.5% of total turnover. Combined royalties, licence fees, and R&D dealings must not exceed AUD 500,000. Excludes financial transactions, royalties, and capital dealings.
6. Technical services
Covers technical advice and support in engineering, architecture, and industrial design, provided these services account for no more than 50% of total international related-party dealings. The cost mark-up must be 10% or less for services received and at least 10% for services provided.
7. Low-level outbound loans
The Australian economic group’s combined cross-border loan balance must not exceed AUD 50 million at any time during the financial year. For 2026–27, the interest rate must be at least 5.69%. The loans and associated expenses must be denominated in Australian dollars.
Election, notification & record-keeping
Entities elect a simplified option by entering Code 7 in the percentage of documentation field of their International Dealings Schedule (IDS) or through their Country-by-Country (CBC) statements. The election does not change transfer pricing obligations, and taxpayers must retain contemporaneous records supporting their eligibility under section 262A of the Income Tax Assessment Act 1936.
