Reconstruction under the new transfer pricing law

Published on 01 Mar 14 by "TAXATION IN AUSTRALIA" JOURNAL ARTICLE

One of the few areas of income tax law in which taxpayers may be subjected to taxation on the basis of a hypothetical alternative to the actual transaction undertaken is the new profit-shifting regime contained in Subdiv 815-B of the Income Tax Assessment Act 1997 (Cth). Determining arm’s length prices can be challenging enough, particularly for complex or unusual transactions, but when the related party transaction itself is open to reconstruction, the task can be even more difficult.

This article describes some of the nuances and potential ambiguity associated with the new Subdiv 815-B in the context of the requirement to reconstruct transactions. The authors provide an overview of Subdiv 815-B and contrast these provisions with the former transfer pricing law (contained in Div 13 of the Income Tax Assessment Act 1936 (Cth)), before undertaking a closer examination of the reconstruction provisions contained in the new laws.

Author profiles

Dritton Xhemajlaj

Dritton is a Senior Manager in PwC's Australian transfer pricing practice with eight years of dedicated transfer pricing experience. He is the national leader for the financial transactions practice of PwC's transfer pricing division. Dritton has significant experience and interest in transfer pricing controversy and litigation. During his time in the PwC transfer pricing team, Dritton spent over a year based out of PwC's Sydney office and a circa 12-month secondment in-house with BHP Billiton in Melbourne assisting them with their transfer pricing function. He continues to be the lead manager on a number of PwC's national transfer pricing accounts. - Current at 31 August 2017

More by Dritton XHEMAJLAJ

• Financing - An overview and recent changes paper - 24-August-2017
• The transfer pricing “reconstruction” provisions: Recharacterising, repricing or reimagining paper - 27-August-2015
• Australian transfer pricing in a BEPS world paper - 17-October-2013

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Nick Houseman CTA

Nick Houseman FTIA is a Partner in Transfer Pricing at PricewaterhouseCoopers, Sydney. Nick has over 15 years experience advising on transfer pricing matters with a focus on the financial services sector. Nick also has extensive experience in local and global transfer pricing documentation and compliance, tax planning, negotiations of Advance Pricing Agreements, competent authority negotiations, litigation support and audit defence in the financial services industry and other industries for well known Australian and foreign companies. Nick has managed many significant regional and global projects based in Asia-Pacific and European regions and has conducted many in-depth financial and economic analyses throughout the financial services industry. - Current at 30 August 2017

More by Nick HOUSEMAN

• Review of transfer pricing rules. - 30-January-2012
• Profit attribution to permanent establishments and transfer pricing following the Roche case paper - 12-February-2009

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