Australia - Transfer pricing now referred to as “profit shifting” 

November 15: The recent introduction of subdivision 815 has provided the Commissioner with significantly broader powers to make transfer pricing adjustments in Australia.

Subdivision 815 has brought a new approach to Australia’s domestic analysis—which arguably goes beyond the traditional Organisation for Economic Co-operation and Development (OECD) transactional focus by requiring an examination of “arm's length financial and commercial conditions.”

Subdivision 815 also provides broad authority for “reconstruction,” which lacks the explicit OECD caveat that such authority is to be used only in “exceptional circumstances.”

In line with OECD work on Base Erosion and Profit Shifting (BEPS), these new rules well equip the Commissioner to combat perceived taxpayer “profit shifting.”


There has been a subtle shift in the nomenclature used by the Australian Taxation Office (ATO). Earlier in March 2013, the ATO released a publication, Overview of International profit-shifting risks and activities in the ATO, in which the ATO started referring to transfer pricing more broadly as “profit shifting.” This evocative language has since been retained in ATO publications and correspondence, including the newly commenced International Structuring and Profit Shifting (ISAPS) program started this month and requesting information on global group activity and profit by location.

What’s in a name? What does it mean?

It is clear that the ATO will continue to focus on transfer pricing in the traditional transaction pricing sense. However, the name change signals a shift to a broader examination of the relationships, structures, and interactions with related parties outside the transactions.

In order to manage their tax exposure and reputational risk, taxpayers need to be vigilant in setting and documenting their transfer pricing policies. In particular, taxpayers must determine that their positions are commercial and well supported for the ATO’s stated focus areas:

  • Low profitability / losses
  • Financing transactions / structures
  • Marketing hubs and support payments
  • eCommerce
  • Intangibles
  • Unique arrangements with limited comparables

Read a November 2013 report prepared by the KPMG member firm in Australia.

For more information, contact a KPMG tax professional in Australia:

Jermey Capes

+61 2 9335 7873

©2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

The KPMG logo and name are trademarks of KPMG International.

KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.

The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Direct comments, including requests for subscriptions, to
For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at:

+ 1 202 533 4366

1801 K Street NW
Washington, DC 20006.

Share this

Share this


Current and future KPMG clients may subscribe to TaxNewsFlash email alerts.

Email your contact information.

TaxNewsFlash-United States by year