Fourteen pages, seven months after losing in the High Court, and the message is that nothing changes.
On 19 March 2026, the ATO released its Decision Impact Statement on PepsiCo [2025] HCA 30. Fourteen pages. Seven months after losing in the High Court. And the message? We lost, but nothing changes.
That is not guidance. That is institutional self-preservation.
What actually happened
The Majority (Gordon, Edelman, Steward and Gleeson JJ) held the concentrate payments under the EBAs were not royalties. The IP licences arose under a separate broader arrangement for different consideration. No royalty under s 6(1) ITAA 1936. No withholding tax under s 128B.
On constructive payment, all seven justices agreed. No antecedent monetary obligation. No deemed payment under s 128A(2). Withholding tax result: 7-0.
On DPT, no tax benefit. The Commissioner’s postulates did not correspond to the substance of the scheme under s 177CB(4)(a)(i). The EBAs were a market-standard franchise model negotiated at arm’s length.
The ATO’s response
At paragraph 60, the ATO says embedded royalties remain alive. At 62, it flags pricing evidence as a future weapon. At 65, it labels arrangements altering IP compensation as “high-risk” for Part IVA and DPT. At 67, it dismisses PepsiCo as confined to “unique” facts.
But the Majority itself described the arrangement as a “commercially standard contracting model” and a “market standard” business model. The ATO is calling standard commercial practice “unique” to confine a High Court loss. That is not analysis. That is spin.
At paragraphs 70-71, the ATO argues multiple reasonable postulates can coexist under s 177CB, in tension with the Full Federal Court in Hicks [2025] FCAFC 171, currently subject to a special leave application. The ATO wants taxpayers to plan around a proposition that may not survive judicial scrutiny.
The real problem
The DIS does not exist to help businesses understand the law. It exists to preserve audit positions, maintain enforcement leverage, and discourage taxpayers from challenging assessments.
And too many advisers will read this DIS and quietly adjust their advice. They will treat the DIS as if it changes what the High Court decided. It does not.
If you advise based on what the ATO says a case means rather than what the Court held, you are not advising. You are deferring. A DIS does not change the law. PepsiCo [2025] HCA 30 is binding. The DIS is not.
The ATO is not obliged to make life easier for business. But when it loses in the High Court and responds by telling the market it will keep running the same position, that is not administration. That is litigation strategy dressed as public guidance. Businesses deserve clarity, not posturing.
General information only. This note was accurate when written. The law may have changed since and the note is not updated. It is not legal or tax advice, does not take account of your circumstances and must not be relied upon as a substitute for advice on your own matter. If the issue is live for you or your client, email arda@nortonquaytaxlaw.com.au for advice on the current position.