Simplified transfer pricing — ATO guidance updated
The ATO has updated its guidance on simplified transfer pricing record keeping options to include the minimum interest rate of 3.79% for small related party outbound loans for the 2018 year. Paragraph 75 of Practical Compliance Guideline PCG 2017/2 has been updated to reflect the new rate. Eligible lenders (among other things, entities with a combined cross-border loan balance of $50m or less for the Australian economic group) charging this interest rate may keep reduced transfer pricing documentation for eligible loans.
For further information, please contact our office on 02 9984 7774 or email us at info@northadvisory.com.au.
“The updated guideline under PCG 2017/2 means eligible taxpayers can rely on simplified transfer-pricing record-keeping options rather than full documentation requirements.”
About the author
Cayle Petritsch - Director & Wealth Advisor
Cayle Petritsch, Director and Wealth Advisor, works with our existing clients who have recognised the importance of business owners making strategic financial choices not only for their company, but for their personal finances too.
Cayle saw a great opportunity to expand North Advisory’s services into SMSF/superannuation, personal wealth management, asset protection services and other crucial personal finance facets that business owners need to consider.
His approach to wealth management allows you to receive highly personalised wealth advice. Working closely with Marius, Cayle understands the unique needs of every client, from their lifestyle and business goals to their retirement plans.
Key Takeaways
The updated ATO guidance simplifies compliance for eligible taxpayers.
Companies that satisfy the eligibility criteria under PCG 2017/2 — such as small businesses or low-risk related-party transactions — may opt for simplified record-keeping rather than full transfer-pricing documentation, reducing burden and cost.
Eligibility criteria are specific — not all related-party dealings qualify.
Only certain types of transactions (e.g. low-value intra-group services, small loans, distribution arrangements under thresholds) may be covered. High-risk dealings — e.g. large financing, royalty/licence fees beyond thresholds — still require full documentation.
Electing a simplification option offers a degree of "compliance assurance.
If the business meets the conditions and elects the appropriate option, the ATO generally will not perform a full transfer-pricing audit on those covered transactions — provided eligibility is properly documented.
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Frequently Asked Questions
What are the “simplified transfer pricing” options?
They are a set of record-keeping concessions offered by the ATO under its Practical Compliance Guideline (PCG 2017/2). Eligible taxpayers — typically small businesses, distributors, or entities with low-risk cross-border dealings — can use simplified documentation instead of full transfer-pricing documentation.
Who is eligible to use these simplified options?
Eligibility depends on factors such as: the size of the “Australian economic group” (e.g. aggregated turnover), the nature and value of related-party dealings (e.g. intra-group services, loans, distribution transactions), absence of sustained losses or significant restructures, and compliance with the arm’s length principle.
What kinds of transactions may be covered under these simplification options?
The simplified options may cover various types of transactions including: intra-group services, low-level loans (inbound or outbound), distribution arrangements, certain technical or low-value dealings, materiality-based exclusions, and small-taxpayer international dealings.
From when do the updated simplification rules apply?
The revised guidance under PCG 2017/2 applies to income years commencing on or after 1 July 2018. There was a transitional period, but for returns from 1 July 2019 onward taxpayers must follow the updated criteria.
Does using a simplified option mean I can ignore all transfer-pricing obligations?
No. Even if a simplified option is elected, the taxpayer must still self-assess compliance with the transfer-pricing rules, maintain general statutory records, and if required declare the election in the International Dealings Schedule (IDS) or relevant reporting forms. The simplification reduces documentation burden — but does not remove the requirement to meet arm’s-length and compliance obligations.
What is the focus of the updated ATO guidance on simplified transfer pricing?
The updated ATO guidance relates to simplified transfer pricing record-keeping options for eligible taxpayers and includes changes like a revised minimum interest rate for certain low-level related party outbound loans (3.79% for the 2018 year).
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