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Form and substance in Australia’s transfer pricing rules


In the absence of a specific legislative direction or guidance from the courts, there is much uncertainty with respect to the meaning of the words “form” and “substance” in Australia’s transfer pricing rules, as well as how the first and second exceptions in s 815-130 of the Income Tax Assessment Act 1997 (Cth) apply. As such, care and careful consideration are needed with respect to supporting transfer pricing positions. This article examines the meaning of the words “form” and “substance”, what is an inconsistency between “form” and “substance”, and the effect of disregarding some or all of the “form” of the commercial or financial relations. This article also examines if the inclusion of the word “substance” in s 815-130(3)(c) affects the meaning of the word “substance” in s 815-130(1)(b) and (2) and vice versa, and analyses “form” and “substance” against the OECD transfer pricing guidelines.

Author profile

Damian Preshaw CTA
Damian Preshaw is a transfer pricing specialist with more than 25 years’ experience in both the private sector and with the Australian Taxation Office and provides specialist transfer pricing services to accounting firms and law firms. Prior to establishing Damian Preshaw Consulting Pty Ltd, Damian was a director in KPMG’s Transfer Pricing Services Group in Melbourne for 12 years. In this capacity, Damian advised a wide variety of multinational clients on transfer pricing and profit attribution issues with a special focus on dispute resolution, financial services, financial transactions and business restructuring. Before joining KPMG, Damian was an international tax counsel in the ATO’s Transfer Pricing Practice in Canberra where he was extensively involved in the ATO’s transfer pricing rulings program and was an Australian delegate to the OECD’s Working Party No.6 (Taxation of Multinational Enterprises) from 1994 to 2003. Damian is a Chartered Tax Adviser and represented The Tax Institute on the ATO’s Division 815 Technical Working Group. Damian has twice appeared as a witness before the Senate Economics Legislative Committee’s hearings in relation to Australia’s new transfer pricing rules on behalf of The Tax Institute. - Current at 09 July 2020
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