Trade policy becomes tax policy, and the law now rewards the prepared.

USTR took final Section 301 action on 23 July 2026; Australia sits in the higher band as the temporary 10% surcharge expires. No rate cap, no sunset.

A section 707-145 cancellation is a joining-year choice only; a 2014 attempt was too late, so $31.3m of transferred losses were retained.

Profit shifting down by roughly half; profit taxed below 15% down about 80%; CIT revenue up US$155-192bn a year, with no measured hit to investment.

The 1 July 2026 start date has passed but the penalty is unlegislated. Assume it binds on its announced terms and document embedded royalties now.

On 23 July 2026 the United States Trade Representative took final action, at the President's direction, under Section 301 of the Trade Act of 1974, imposing tariffs on 60 economies over the enforcement of forced-labour import prohibitions. Duties are set at 10% for 15 partners and 12.5% for 45; Australia falls in the higher band, so Australian goods now face a 12.5% tariff on entry into the United States. The measure takes effect as the temporary 10% surcharge imposed under section 122, in force since 24 February 2026, reaches its 150-day expiry on 24 July. Unlike that surcharge, a Section 301 action carries no rate cap and no automatic sunset, and can be widened by product list, so for many exporters the cost is higher and more permanent than the measure it replaces.

What clients should do. Quantify the exposure now on every intercompany flow of goods into the United States, and check whether any products fall within the exclusions that accompany the determination. Tariffs are no longer a customs-only concern: the customs value moves with the transfer price, so align the two positions before the duty lands, model the margin impact on United States distribution entities, and monitor the product-list scope, which can expand administratively without fresh legislation.

In Evolution Mining Limited v Commissioner of Taxation [2026] FCA 935 (Jackman J, 17 July 2026), the Federal Court gave section 707-145 of the ITAA 1997 its first judicial consideration. When Conquest Mining joined the Evolution consolidated group on 2 November 2011, losses of $31,292,880 for the 2007 to 2010 years transferred automatically to Evolution as head company under section 707-120. A choice in Evolution's 2014 return purported to cancel that transfer. The Court held the cancellation had to be made in the joining year; the 2014 choice was too late and ineffective, so the losses were retained.

What clients should do. Review the loss registers of every consolidated group where transferred losses are material, and confirm whether any cancellation choices were made, attempted or assumed outside the joining year. Where acquisitions are in contemplation, build the section 707-145 timing point into the loss modelling at the outset, alongside the available fraction and continuity of ownership analysis, so the election is made correctly in the joining-year return rather than discovered as a problem later.

On 15 July 2026 the OECD published its first empirical assessment of the global minimum tax, using data for the 2024 fiscal year. Effective tax rates have risen, profit shifting has fallen by roughly half (international profit transfers down between 22.6% and 44.6%), the amount of profit taxed below the 15% floor is down about 80%, and corporate income tax revenue is estimated to rise by US$155 billion to US$192 billion a year, with no statistically significant hit to investment or employment. The wider corporate tax statistics show large multinationals now contributing around 44.5% of corporate tax revenue, up from 42.8% in 2017.

What clients should do. Stop treating Pillar Two as provisional. The United States will not implement it and the Side-by-Side package accommodates that, but jurisdictions are still legislating, with Luxembourg this week submitting its implementing law. Finalise the data feeding the GloBE Information Return, confirm transitional safe harbour eligibility jurisdiction by jurisdiction, and reconcile the effective tax rate and top-up numbers to the accounts and the tax provision.

The royalty penalty announced in the 2024-25 Budget was expressed to apply from 1 July 2026 to groups with more than $1 billion in global turnover that mischaracterise or undervalue royalty payments subject to withholding tax. That start date has now passed, yet the enabling law has not been enacted and no draft is before Parliament. The separate intangibles deduction-denial measure has been dropped in favour of the global minimum tax, but the royalty penalty remains on the agenda and reflects the ATO's continuing focus on royalties embedded in payments for goods, services or software.

What clients should do. Assume the penalty will be enacted with effect from 1 July 2026 and prepare on that basis. Re-examine cross-border arrangements where a royalty may be embedded in a bundled payment, document the characterisation and the pricing, and confirm withholding has been remitted where the substance supports it. Building that record now is trivial against reconstructing it under audit with a penalty in prospect.

Certainty rewards the prepared.

The common thread this week is certainty, and who benefits from it. Evolution Mining confirms that the law will hold a taxpayer to the precise timing of its elections. The OECD's data confirms that the global minimum tax is delivering the revenue and base protection it was designed to deliver, which strengthens the case for its permanence. And the new United States tariff confirms that trade cost is now a variable that moves with intercompany pricing and belongs inside the tax conversation.

The strategic question is whether your group's systems are built for a world of enforced certainty or for one of tolerated ambiguity. The elections, characterisations, safe harbour positions and pricing that once could be left loosely documented are now the very things that decide outcomes when a court, the OECD or a revenue authority tests them. The groups that treat these as living systems, maintained and evidenced in real time, will navigate the year ahead comfortably.

There is also a sequencing point. The royalty penalty that has commenced without a law, and the United States tariff that has arrived by administrative action rather than fresh legislation, are two illustrations of a larger pattern: policy intent and executive action are running ahead of the ordinary legislative rhythm. Building to the announced position, rather than waiting for the settled one, is becoming the safer default for groups that cannot afford to reconstruct their records or their supply chains under pressure.

Pereira Consulting is an independent tax advisory practice founded by Neil Pereira, advising multinational groups on international tax operating into and out of Australia on Pillar Two readiness, transfer pricing, anti-avoidance, ATO disputes and corporate income tax compliance. Neil is a Chartered Tax Adviser, Registered Tax Agent and Solicitor.

Disclaimer. This newsletter is general information only and does not constitute tax or legal advice. It is current as at the issue date. Pereira Consulting accepts no liability for any decision made in reliance on its contents. Please contact Neil Pereira to discuss the application of these developments to your specific circumstances.