24 May 12 Retrospective Transfer Pricing Bill introduced
On 24 May 2012, Tax Laws Amendment (Cross-Border Transfer Pricing) Bill (No 1) 2012 was introduced into the House of Representatives.
The following is extracted from the Explanatory Memorandum.
SCHEDULE 1 to the Bill inserts Subdivision 815-A into the ITAA 1997 to confirm that the internationally consistent transfer pricing rules contained in Australia’s tax treaties and incorporated into Australia’s domestic law provide assessment authority to address treaty related transfer pricing. The purpose of these rules is to limit taxable profits being shifted or misallocated offshore.
The amendments also provide direct access to Organisation for Economic Cooperation and Development guidance material and clarify how the Subdivision will interact with Division 820 of the ITAA 1997, which deals with thin capitalisation.
Date of effect: This measure applies for income years commencing on or after 1 July 2004.
The Explanatory Memorandum seeks to justify the retrospective nature of these amendments as follows:
"The application of the law, as amended by Subdivision 815-A, is consistent with Parliament’s view that treaties provided a separate basis for making transfer pricing adjustments. These amendments ensure the law can operate as the Parliament intended.
Although there has been a consistent assumption by Parliament, since at least 1982, that treaties provided a separate basis for making transfer pricing adjustments, the application date for this Bill to income years commencing on or after 1 July 2004 follows the most recent Parliamentary statement to this effect in 2003."