The ATO has indicated that it will continue to target Australia operations that make losses over a prolonged period, even though the Australian Courts have ruled there are valid non-tax reasons for doing so.
The ATO may impute an “implied service fee “ (to reflect the benefit to the wider group of building Australian market share, the result being a foreign parent having to support its Australian subsidiary).
In addition to transfer pricing developments, changes proposed to the taxation of Australian branches will have implications for the approach adopted by New Zealand.
The ATO’s stance on the 183-day rule, in the tax treaty, for creating an Australian taxable presence will come as a shock to many NZ business that provide expertise to their Australian parents (or subsidiaries).
If you have any questions on the above, please speak to your usual KPMG advisor or contact: