Summary
The Australian Taxation Office (ATO) published Draft Practical Compliance Guideline PCG 2019/1DC on December 10, 2025, providing revised transfer pricing compliance guidance relating to inbound distribution arrangements. The draft updates propose modifications to key aspects of the ATO’s compliance approach, including profit margin benchmarks, definitions of covered distributors, risk categorization and reporting expectations as applied to inbound distribution arrangements under existing Australian transfer pricing rules.

Key points

Scope of guidance
Draft PCG 2019/1DC sets out the ATO’s proposed compliance approach to transfer pricing risks associated with inbound distribution arrangements. The Guideline is limited to those risks posed by the profit outcomes of such arrangements, where an Australian entity purchases goods, digital products or services from related parties for resale without significant related-party manufacture or modification within Australia.

Definition of “inbound distributors”
The draft updates revise the definition of covered inbound distributors, including clarifications for entities involved with digital products or services. The refined definition is intended to delineate when digital distributors fall within the scope of the PCG based on the nature of activities and contribution to underlying intellectual property.

Profit marker benchmarks and risk zones
The draft guideline proposes adjustments to profit marker benchmarks used for assessing transfer pricing risk in inbound distribution. Key sectors, including life sciences and information and communication technology, have updated earnings before interest and tax (EBIT) margin ranges for low, medium and high risk categories. Revised benchmarks aim to reflect current economic data and sector-specific considerations.

White zone and risk categorization
Draft PCG 2019/1DC introduces a “white zone” category for taxpayers with specified conditions, such as those covered by an executed Advance Pricing Arrangement (APA) or recent high assurance ATO review outcome without material change. Taxpayers within the white zone are distinguished from traditional low, medium and high risk zones for compliance assessment.

Reportable Tax Position (RTP) guidance
The draft includes expanded guidance on self-assessment and disclosure in the Reportable Tax Position (RTP) schedule for applicable taxpayers. This clarifies expectations for taxpayers required to disclose their transfer pricing risk assessment in relevant tax filings.

Multi-year testing
The draft clarifies that transfer pricing risk assessment under the PCG will be based on a weighted average approach to EBIT margins over a multiyear period (e.g., a five-year weighted average), focusing on segmented inbound distribution activity rather than aggregated business results.

Consultation period
The ATO has opened the draft PCG for public comment until February 13, 2026.

Source
Australian Taxation Office, Draft Practical Compliance Guideline PCG 2019/1DC – Transfer pricing issues related to inbound distribution arrangements (10 Dec 2025)
https://www.ato.gov.au/law/view/document?DocID=DPA/PCG20191DC1/NAT/ATO/00001

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Disclaimer:
This content is for general informational purposes only and does not constitute professional advice. 

Information provided herein is based on publicly available sources as of the publication date and may be subject to change. 

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