Transfer pricing record-keeping made simple
Companies, trusts and partnerships can simplify their transfer pricing record-keeping requirements if any of following options applies:
- Small taxpayers with turnover under $25m for the year for their “Australian economic group” (see below)
- Materiality. Total international related-party dealings represent not more than 2.5% of the total turnover for the Australian economic group
- Distributors with a turnover under $50m for the Australian economic group
- Intra-group services. The combined value of intra-group services rendered or provided was:
- $1m or less, or
- more than $1m, but the total amount
- charged for the services they received was not more than 15% of the total expenses of the Australian economic group, and
- derived for the services they provided was not more than 15% of the total revenue of the Australian economic group
- Management and administrative services. Income and expenditure on these services was not more than 50% of the total international party dealings of the Australian economic group
- Technical services. Income and expenditure on these services was not more than 50% of the total international related-party dealings of the Australian economic group
- Low-level inbound loans of $50m or less for the Australian economic group, and
- Low-level outbound loans of $50m or less for the Australian economic group.
“Companies, trusts and partnerships can simplify their transfer-pricing record-keeping requirements if one of the listed ‘safe-harbour’ conditions applies.”
An Australian economic group consists of an entity together with all the entities it is required to include in its consolidated financial statement by Australian Accounting Standard AASB10.
An entity can be a company, partnership, superannuation fund or trust.
The ATO Guideline specifies further eligibility criteria for the options. Taxpayers must self-assess to determine whether they meet these criteria.
The options reflect the types of transactions or activities the ATO believes are low risk in the context of international related party dealings.
If taxpayers apply any of these options, then the ATO will check to confirm their eligibility, but will not further review the relevant transactions or arrangements for transfer pricing purposes.
Taxpayers must keep contemporaneous documentation to substantiate their eligibility.
They must also inform the ATO of their election. This can be done by including code 7 at the percentage of documentation label field in the International Dealings Schedule (IDS) for relevant categories of transactions on the IDS.
It must be noted that this code was not available for the 2014 income year – taxpayers who are contacted for the 2014 income year must inform the ATO that one or more options have been applied.
Note that taxpayers are still required to comply with the general record-keeping requirements.
Date of effect
| Simplification option | Available from | For taxpayers with substituted accounting periods |
| Small taxpayers | 1 July 2013 | 1 January 2013 |
| Distributors | 1 July 2013 | 1 January 2013 |
| Intra-group services | 1 July 2013 | 1 January 2013 |
| Low-level inbound loans | 1 July 2013 | 1 January 2013 |
| Materiality | 1 July 2015 | 1 July 2015 |
| Management and administration services | 1 July 2015 | 1 July 2015 |
| Technical services | 1 July 2015 | 1 July 2015 |
| Low-level outbound loans | 1 July 2015 | 1 July 2015 |
If you have any questions, please do not hesitate to contact us.
Martin van der Saag
Director
T: 02 9984 7774
E: martinv@northadvisory.com.au
Judy She
Senior Accountant
T: 02 9984 7774
E: judys@northadvisory.com.au
“Using a simplification option means the ATO will not conduct a full review of the covered related-party transactions — provided eligibility criteria are met and documented.”
About the author
Marius Fourie - Director & Business Advisor
As Director and Business Advisor, Marius uses his accounting expertise and empathetic skills to work directly with business owners and help them feel at ease with their finances.
Marius saw a common need in clients that just wasn’t being met by accounting providers.
That need was for clear, open communication and streamlined accounting services that didn’t come padded out with any unnecessary features.
Business owners just don’t have time to compare different accounting firms to see which one has the best packages with the best inclusions (many of which they would pay for but never use).
Key Takeaways
Simplified record-keeping exists to ease compliance for low-risk international dealings.
For smaller groups or limited cross-border transactions, it avoids the heavy documentation burden typically associated with transfer pricing.
Eligibility is based on clear quantitative thresholds — turnover, loan value, related-party dealing size, service value, etc.
This makes it relatively objective to self-assess whether you can use a safe-harbour option.
Even with simplified rules, record-keeping is mandatory — you must document eligibility and record rationale.
Maintaining contemporaneous records proves vital if the tax authority requests evidence later.
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Frequently Asked Questions
What is the purpose of “simplified transfer-pricing record-keeping” under the ATO?
It’s a set of safe-harbour options (in PCG 2017/2) that allow eligible taxpayers to reduce the compliance burden for international related-party transactions, avoiding full transfer-pricing documentation if they meet certain criteria.
Who qualifies for simplified record-keeping under these guidelines?
Qualifying entities include “small taxpayers” (with relatively low turnover), certain distributors, and those whose related-party dealings or loan/ service/ transaction volumes fall under defined thresholds for materiality, intra-group services, loans or technical services.
What kinds of transactions can be covered by simplified record-keeping?
Examples include low-value intra-group services, small-volume inbound or outbound related-party loans under set thresholds, simple distributor arrangements, or other international dealings judged to pose low risk under the safe-harbour criteria.
If I use a simplification option, do I still need to produce any documentation?
Yes — you still must keep contemporaneous documentation to demonstrate you met the eligibility criteria for the simplification option (e.g. turnover levels, loan balances, percentages etc.), and you must declare the election (e.g. via the relevant code on your International Dealings Schedule).
Does applying a simplification option exempt me from the transfer-pricing rules entirely?
No — the simplification doesn’t change the underlying law. Even when eligible, you must still comply with the arm’s-length principle, and the simplification only reduces documentation burden, not the obligation to price related-party transactions correctly.
What is transfer pricing record-keeping?
It refers to keeping records that support how you price international related-party transactions, so you can show the ATO your dealings are low risk and appropriately priced.
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