Transfer pricing record-keeping made simple
Posted by Northadvisory on September 22, 2017
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:
o $1m or less, or
o 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.
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|
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Martin van der Saag
T: 02 9984 7774
T: 02 9984 7774