• Service: Tax, Global Transfer Pricing Services, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 8/16/2013

Australia - New transfer pricing rules 

August 16:  New transfer pricing rules in Australia are effective for tax years starting on or after 1 July 2013, and apply to the transactions of all multinational entities operating in Australia.

The new transfer pricing rules focus more on the arm’s length profit for an Australian taxpayer (as compared to the arm’s length price under the old rules). The new rules grant broader authority to the Australian Taxation Office (ATO) to investigate “loss makers.”

With its new authority, the ATO can “reconstruct” a transaction when the actual transaction differs from the transaction that would have occurred between unrelated parties.

Self assessment

Taxpayers must decide whether they have complied with the new transfer pricing rules before filing their tax returns.

  • If profits are too low, taxpayers may need to increase their taxable income.
  • If profits are too high, taxpayers can decrease their taxable income.

Transfer pricing documentation

One method to comply with the self-assessment obligation is to prepare transfer pricing documentation—which will document how the new rules apply to the taxpayer’s business and quantify any required profit adjustments.

In addition, taxpayers that do not prepare their transfer pricing documentation prior to filing their tax returns may be deemed not to have a “reasonably arguable position” and thus may be subject to increased penalties.

Limitations period for adjustments

Transfer pricing adjustments under the new rules can only be made within seven years of the original assessment. Previously there was no time limit.

Contact a tax professional with KPMG's Global Transfer Pricing Services.

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