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On 26 February 2015 the ATO issued Practice Statement PS LA 2015/3 entitled “Approval process for the application of subsections 815-130(2) to 815-130(4) of the Income Tax Assessment Act 1997 (ITAA 1997)”.
The Practice Statement is intended to provide guidance to ATO personnel on the approval process where the Commissioner relies on s 815-130(2)-(4) of the ITAA 1997 to identify arm’s length conditions in relation to cross-border transfer pricing.
Section 815-130(1) provides the “basic rule” for the way in which an entity’s arm’s length conditions are to be identified, that is, that they be based on the commercial or financial relations in connection with which the actual conditions operate and have regard to both the form and substance of those relations. Subsections 815-130(2)-(4) provide exceptions to that rule depending on whether the form and substance of those relations is consistent, or on what independent entities dealing wholly independently with one another in comparable circumstances would have done, or would not have done.
In considering whether any of the exceptions to the basic rule in s 815-130 may apply to an entity in a particular instance, ATO personnel must:

  • at first instance, notify the Internationals section of the Public Groups and International business line (PG&I) of the existence of the matter for tracking of such cases
  • engage relevant technical expert(s) as early as possible. In the case of the PG&I, the relevant technical experts in the Technical Leadership Group or Internationals section of PG&I. In the case of the Private Groups and High Wealth Individuals business line (PGH), the relevant technical experts in the Technical Excellence Services stream of PGH or those mentioned above for PG&I
  • raise the matter with the taxpayer and give the taxpayer the opportunity to clarify the facts and address any concerns that the ATO may have.



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