[The ATO states, on its website] We conduct transfer-pricing reviews as part of broader risk reviews of businesses under our compliance program. Documenting your transfer pricing:

  • is important for demonstrating your compliance with Australia’s transfer pricing rules
  • can be costly, particularly for smaller businesses.

The ATO have developed some simplified transfer pricing record keeping options so that certain eligible businesses can opt to minimise some of their record-keeping and compliance costs.

This information explains:

  • these transfer-pricing record-keeping options
    • materiality;
    • small business taxpayers;
    • distributors;
    • intra-group services;
    • management and administration services;
    • technical services;
    • low level loans – inbound;
  • specific criteria that need to be met for a business to opt in;
  • disclosing within the international dealing schedule the selection and application of an option;
  • providing evidence of the applicability of the eligibility criteria to your circumstances if you are using any of the simplified record-keeping options;
  • that relevant dealings will not be subject to a review once an option is selected and disclosed;
  • that options will be available for a three-year period.

[* There is no indication where this ‘information’ is…]

Important points – When we refer to ‘you’ we are referring to you as an entity with international related-party dealings.

This information does not replace, alter or affect in any way the ATO interpretation of the relevant law as discussed in various taxation rulings. Section 262A(1) of the Income Tax Assessment Act 1936 [about record-keeping generally] continues to apply.

Your related-party transactions may also be subject to goods and services tax (GST). If so, you need to take into account any GST implications when considering your position and any action you may take. You may also need to consider customs duties.

Businesses not covered by a simplified record-keeping option are expected to contemporaneously document their relevant related-party dealings and more specifically consider the requirements of Division 284-E of Schedule 1 to the Tax Administration Act 1953 [which deems any adjustment under the transfer-pricing provisions, to lack a ‘reasonably arguable position’ (and thus a 25% shortfall penalty), if there is documentation of the taxpayer’s transfer-pricing position is not adequate].

See also:      Interpretive guidance can be found in TR 2014/8 Income tax: transfer pricing documentation and Subdivision 284-E [ATO statement 1.12.15] [LTN 3, 7/1/16]