Recent Developments – Australian Transfer Pricing (TP) Rules: Time To Step Up

With the Australian Taxation Office’s (ATO) escalating focus on international profit shifting, it is essential for multinational taxpayers (MNEs) to properly understand the new Australian Transfer Pricing (TP) rules, assess the implications of these rules on their operations/transactions, what documentation they need to prepare and when, and what penalties may apply if the ATO disagrees with their approach.

The ATO has in recent months issued several Practice Statements and Taxation Rulings (summarised in Appendix A) to provide guidance to MNEs in respect of the application of the new TP rules. Most recently, the ATO issued Practice Statement PS LA 2015/3 on 26 February 2015. This Practice Statement outlines the internal ATO approval processes to amend the actual commercial or financial relations of the parties in identifying arm’s length conditions in relation to cross-border TP.