Australia: Enactment of news media bargaining incentive law targeting large digital platforms

The news media bargaining incentive (NMI) legislative package was enacted on August 26, 2026.

Taxpayer

A parent entity will be liable for the NMI in a financial year if two key conditions are met by its service group (the parent entity and all controlled entities). A "service group" comprises the parent entity (an entity not controlled by any other entity) together with all entities it controls, with control determined in accordance with accounting standards rather than the income tax consolidation rules. Accordingly, the group boundary follows financial‑reporting consolidation principles and will not necessarily match a taxpayer's income tax consolidated group.

The first condition is the provision of a "significant" digital service (a user-based test). One or more members of the service group must provide one or more significant social media or search services in Australia at any time during the financial year. A service is "significant" based on its average monthly active Australian users in the previous financial year: for a social media service, exceeding 5 million active Australian users; and/or for a search service, exceeding 10 million active Australian users. A professional networking service may fall within the social media service definition if the relevant statutory requirements are otherwise satisfied. Stand-alone AI / large language model (LLM) services that generate answers without conducting an underlying internet search are outside the "search service" definition. A search engine that merely uses an LLM to summarize internet search results remains in scope.

The second condition is the Australian revenue threshold (a digital advertising revenue test). The service group must have total relevant Australian digital advertising revenue that exceeds AU$250 million for the group's 12-month financial reporting period. The base is confined to relevant Australian digital advertising revenue attributable to the relevant significant social media or search services.

Sourcing and tax base

The NMI base is the service group's relevant Australian digital advertising revenue. This is broadly the portion of each service group member's gross revenue, determined in accordance with accounting standards, that is attributable to advertising on the relevant service and to transactions within or into Australia, or to Australian assets attributable to that service. For instance, this includes revenue attributable to digital advertising directed at Australian users, even if the parties to the agreement are outside Australia. Revenue from tangible goods and other non-advertising services is not included in the base.

The NMI amount is calculated by applying the NMI rate of 2.75% to this Australian digital advertising revenue from the second-most-recent financial year before the NMI financial year. For example, the 2026-2027 NMI would be based on 2024-2025 Australian revenue.

Offset mechanism

The NMI allows an offset for payments made to news business corporate groups that serve an Australian audience and produce Australian public interest journalism in the current financial year. The value of this expenditure is uplifted to 200% for expenditure with small or medium business entities (broadly, an AU$50 million aggregated-turnover threshold test), and to 150% for all other news business corporate groups.

To obtain any NMI offset, the service group must have new eligible expenditure with at least eight different Australian news business corporate groups. In calculating the offset, the amount of eligible expenditure attributable to any one news business corporate group, after application of the relevant uplift rate, is limited to 25% of the total NMI payable for the financial year.

Any eligible expenditure (after uplift rates have been applied) that is not used in an NMI offset calculation in a financial year can be carried forward to future financial years. New eligible expenditure from a year in which the eight-group entitlement condition is not satisfied cannot be carried forward.

Transitional arrangements apply at the start of the NMI, allowing a broader range of commercial deals to generate eligible expenditure, including certain deals with news businesses that are not registered. Under these arrangements, consideration for advertising or marketing may qualify, but the amount attributable to advertising or marketing that may be treated as eligible expenditure is capped at 40% of the total monetary or non-monetary consideration under each commercial deal.

Compliance

A parent entity must submit a return in the approved form to the Commissioner, even if the NMI liability is reduced to nil by offsets. The due date for filing is within six months after the end of the financial year. The NMI is payable within 21 days after the Commissioner issues a notice of assessment (being the time the return is filed). Each member of the service group and the parent entity are jointly and severally liable for any NMI and interest payable. Anti-avoidance provisions are included to negate any benefit obtained from schemes designed to avoid liability for the NMI.

Effective date

The NMI is applicable for financial years beginning on or after July 1, 2025, for a parent entity with a 12-month financial reporting period starting on or after January 1, 2025. This means the NMI will apply from the 2025-2026 financial year and later financial years.

For more information, contact a KPMG tax professional:

Philippe Stephanny | philippestephanny@kpmg.com

Amanda Maguire | amaguire@kpmg.com.au