The bill—Tax Laws Amendment (Countering Tax Avoidance and Multinational Profit Shifting) Bill 2013—also includes new provisions with respect to determining a tax benefit under the general anti-avoidance rule (GAAR).
Proposed changes to transfer pricing rules
The bill introduces the government's second phase of transfer pricing amendments. These amendments would apply to both tax treaty and non-tax treaty situations, and would aim at applying “very broad” concepts of arm’s length conditions to examine dealings between parties, rather than focusing on the specifics of price or transactions.
The proposed amendments place greater emphasis on the notion of bargaining. The amendments also contain an effective reconstruction power that is reportedly intended to apply in exceptional circumstances and would allow for consideration of hypothetical dealings.
The proposed amendments also contain specific rules relating to transfer pricing documentation—i.e., rules that would relate to the ability to form a reasonably arguable position, which, if enacted, would be a significant change in the transfer pricing environment in Australia.
Read a February 2013 report [PDF 97 KB] prepared by the KPMG member firm in Australia: New Australian Transfer Pricing Legislation – Phase 2
General anti-avoidance rule
The proposed amendments would provide new rules for determining a tax benefit under the general anti-avoidance provision. Part IVA. A new Section 177CB would be inserted, to provide a framework for determining an alternative postulate that is used to ascertain whether there is a tax benefit.
Broadly, the framework would require for tax liabilities to be ignored in determining the alternative postulate and to assume an end “non-tax” position that the taxpayer actually achieved under the scheme.
The new rules, if enacted, would apply to transactions entered into after 15 November 2012.
Contact a tax professional with KPMG's Global Transfer Pricing Services.