On 15 December 2017, the ATO released the report, Tax and Corporate Australia. This report identified that there is a key compliance risk associated with the transfer pricing of inbound supply chain (ISC) arrangements. The report questions whether appropriate profit is being recognised in Australia where goods or services are being purchased from a related party and on-sold to Australians.

Then, on 24 July 2018, the ATO uploaded a page, on its website, outlining its ‘ISC strategy’, it developed, to help manage this risk. It developed the strategy to manage the transfer pricing risk associated with supply chains into Australia. It will ensure the ATO provides you with transparent and tailored client experiences. [ATO ‘speak’]

The strategy, at this stage, is focussing on the key industry sectors of:

  1. e-commerce and information technology,
  2. pharmaceuticals,
  3. motor vehicles, as well as
  4. general distributors.

As part of the strategy the ATO says it will:

  • develop a practical compliance guideline (PCG) to outline our compliance approach to these arrangements to help you make informed decisions about your tax affairs; and
  • apply consistent treatment of transfer pricing risks associated with ISC arrangements through various compliance approaches, promoting fairness.

The ATO says its webpage (about how it manages transfer pricing risks associated with certain supply chains into Australia) will be updated as the strategy progresses and the PCG is developed.

[ATO website: ISC Strategy; LTN 141, 25/7/18; Tax Month – July 2018]

 

Comprehension questions (answers available)

  1. Is the ATO concerned about the ‘transfer pricing’ risks associated with Inbound Supply Chains?
  2. Will the ICS Strategy be initially focused on 4 industries, including minerals extraction?
  3. Will the strategy include developing a PCG in the area.

SIGN UP (free trial)

or

LOG IN