Australia

Details

  • Service: Tax, Global Transfer Pricing Services
  • Type: Regulatory update
  • Date: 17/07/2014

Tax Insights

KPMG's analysis of tax issues and developments.

Alun Richards

Alun Richards
Director, Global Transfer Pricing Services, Tax

+61 2 9346 5767

alunrichards@kpmg.com.au

Transfer Pricing: A traffic jam when you’re already late 

by Alun Richards, Transfer Pricing Specialist

“... A no smoking sign on your cigarette break” sang Alanis Morissette on her 1996 hit 'Ironic' announcing herself as a defining singer songwriter of the 90s and also as someone who did not understand the meaning of the word 'irony'.

Perhaps a better example of irony is that we find ourselves in July 2014 still awaiting the Australian Taxation Office’s (ATO) guidelines on the preparation of contemporaneous transfer pricing documentation under the new Transfer Pricing (TP) legislation which will apply to the taxation year ended 30 June 2014.

 

To date, the ATO has released Draft Ruling TR 2014/D4 outlining the new TP documentation requirements under Subdivision 815. This ruling is not expected to be finalised before October.

 

The new documentation requirements will be more onerous than the existing 4-step process advocated by the ATO, potentially creating an additional compliance burden. This sentiment was expressed very clearly by taxpayers in response to the ATO’s request for comments on the draft ruling.

 

As a result and consistent with the Commissioner's intent to concentrate his efforts on high risk international dealings, proposals are currently being discussed regarding the simplification of transfer pricing record keeping requirements for certain low risk taxpayers and dealings. This could potentially include:

 

  • small taxpayers – below a turnover threshold with routine related party dealings
  • distributors – below a turnover threshold with routine dealings and exceeding a minimum benchmarked profit before tax (PBT)
  • intra-group services – expanding on the safe harbour provisions in TR 99/1
  • low level loans – AUD denominated and below a balance threshold.

 

These proposals are still in draft, however the introduction of more onerous documentation requirements could herald the arrival of long overdue simplification measures for low risk taxpayers and dealings.

 

Isn’t that ironic?

 

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