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Transfer pricing legislation reform – tranche 2: What does it mean for taxpayers?


In September 2012, the first tranche of Australia’s revised transfer pricing legislation received royal assent as Subdiv 815-A of the Income Tax Assessment Act 1997 (ITAA97). The legislation applies to transactions with treaty countries commencing 1 July 2004 and is applicable to situations where an entity receives a transfer pricing benefit. In 2013, a second tranche was introduced as Subdivs 815-B, 815-C and 815-D ITAA97 and Subdiv 284-E of the Taxation Administration Act 1953. Broadly, the amendments allow the Commissioner of Taxation to replace actual conditions with arm’s length conditions, and provide a legislative basis to apply profit-based approaches to calculate transfer pricing adjustments.

This article summarises the key aspects of the amendments, and examines in detail the likely implications for taxpayers. Examples are provided of transactions that may be at risk of challenge under the new rules. The article concludes with a number of recommended action steps for taxpayers.

Author profiles:

Jesper is a Partner at Ernst and Young.
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Author Photo - Paul Balkus
Paul Balkus
Paul is the co-leader of Ernst & Young’s Oceania Transfer Pricing practice. He has over 20 years experience in the field of tax and transfer pricing including significant experience in servicing clients across most industries including financial services, mining and resources, pharmaceutical and fast moving consumer goods. Paul has been involved in all aspects of transfer pricing including advance pricing arrangements, dispute resolution, planning and documentation. More specifically, Paul’s experience has included addressing transfer pricing issues in connection with inter-company arrangements involving supply chain restructuring arrangements, global funds management, credit and performance guarantees, global trading and intercompany financing. Current at 02 June 2014 Click here to expand/collapse more articles by Paul BALKUS.
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