Australia Transfer Pricing Policy

Australia Transfer Pricing Policy

Email: mel4ww@evershinecpa.com

Australia CA Lily Yan, speak both English and Chinese
2/172-176 Rowe St Eastwood, NSW 2122, Australia

TP-Q-10
Why kinds of scenarios will be adopted TP policy? What is the relevance between DTA and TP policy?

TP-A-10
When an Australia Tax entity would like to pay out whatever business profits, Royalty, Technical Services fees, Interests, trading amount etc., it will adopt DTA tax rate. Its judge criteria, please see the Australia Treaty Page.
But if want to verify the above-mentioned amount if reasonable, will adopt Australia TP Policy.

TP-Q-20:
在澳洲甚麼情況下, WFOE 外商投資企業不需要同時處理TP 申報和文件申報?
What are the scenarios in Australia, that a Wholly Foreign-Owned Entity (WFOE) is exempted from compliance of Transfer Pricing (TP) declaration and TP documentation?

TP-A-20:
You are exempted from TP declaration if: –
International Dealings Schedule (IDS)

The aggregate value of International Related-Party Dealings (IRPD) < AUD 2 million.

You are exempted from TP documentation if: –

Local and Master File

1.ATO concludes that there is no, or limited transfer pricing risk based on the absence of cross border related party dealings or,

2. Consolidated UPC’s revenue < AUD 1 billion in the preceding fiscal year.

CbC Report

1.ATO concludes that there is no other jurisdiction that may be expecting a CbC Report from Australia in relation to an entity or,

2. Consolidated UPC’s revenue < AUD 1 billion in the preceding fiscal year.

TP-Q-30:
在澳洲甚麼情況下, WFOE 外商投資企業需要向該國的稅務局發送TP 申報? 甚麼是申報單名稱?
What are the scenarios in Australia, that a Wholly Foreign-Owned Entity (WFOE) is required to submit TP declaration to country’s tax bureau? What is the name of the TP declaration form?

TP-A-30:
International Dealings Schedule (IDS)
The aggregate value of International Related-Party Dealings (IRPD) > AUD 2 million.

TP-Q-40:
在澳洲甚麼情況下, WFOE 外商投資企業需要向該國稅務局發送TP 申請和文件? 甚麼 declaration 表單名和文檔名?
What are the scenarios in Australia, that a Wholly Foreign-Owned Entity (WFOE) is required to submit TP declaration and TP documentation to the country’s tax bureau? What is the name of the TP declaration form and TP documentation form?

TP-A-40:
When Aggregate value of International Related-Party Dealings (IRPD) > AUD 2 million – prepare for International Dealings Schedule (IDS).
When consolidated UPC’s revenue > AUD 1 billion in preceding fiscal year – prepare Local, Master File and CbC Report.

Australia TRANSFER PRICING for professionals

Overview

Australia adopts the OECD transfer pricing model.
Australia’s transfer pricing rules aim to make sure that businesses price their related-party international transactions in line with arm’s length transactions with independent third parties of the same situation.
If pricing does not comply with Australia’s transfer pricing rules, it is often referred to as “international profit shifting”.
The Australian Taxation Office (ATO) requires all companies to keep appropriate documents for the transaction, commercial justifications and the pricing methodologies used when entering the transaction.

Related Party

Australia’s transfer pricing legislation does not provide a definition of related parties.
The legislation is applicable if an Australian entity transacts any non-arm’s length cross-border conditions, regardless of whether the parties are related to one another.
There are no control or ownership thresholds for the legislation to apply.
However, there are International Dealings Schedule (IDS) to be lodged where a taxpayer has entered certain international dealings or arrangements.

Terms as per the IDS includes:

*Any overseas entity or person who participates directly or indirectly in Australia entity’s management, control, or capital.

*Australia entity participates directly or indirectly in an overseas entity or person in the management, control, or capital.

*Any overseas entity or person in respect of which persons who participate directly or indirectly in its management, control, or capital are the same persons who participate directly or indirectly in Australia entity’s management, control, or capital.

Transfer Pricing method

Australia’s legislation does not specify any method to be used in respect of transactions between related parties.
Australia seeks to adopt the method that is the most appropriate and reliable or best suited to the circumstances of each case. In identifying the arm’s length conditions, use the method or the combination of methods, that is the most appropriate and reliable.
Below is the acceptable TP method.
*Comparable Uncontrolled Price (CUP)
*Resale price
*Cost-plus
*Transactional profit split
*Transactional net margin

Transfer Pricing documentation

The CbC report and Master file are consistent with the OECD format.
The Australian interpretation of the Local file deviates significantly from the interpretation in the rest of the world. In Australia, the local file is a collection of transactional data and other information structured in three parts:

  1. The short-form local file
  2. Part A of the local file
  3. Part B of the local file

There is no documentation obligation for domestic transactions.

Due dates and respective threshold:

  Preparer Due Date Threshold
1. TP declaration forms
International Dealings Schedule (IDS) CE in Australia Lodge as part of corporate tax return before due 30 June of the following calendar year. Aggregate value of International Related- Party Dealings (IRPD) >AUD2million
2. TP documentation
2.1 Local File
 
Prepare within 12 months after the fiscal year-end of UPE and submit within 28 days upon request by the ATO. Consolidated UPC’s revenue > AUD 1 billion in the preceding fiscal year.
2.1.1 Short Form Local file UPE and CE in Australia The two conditions fulfill:
1.Has No International Related Party Dealings (IRPDs) on the short form exceptions list.
2. Aggregate value of IRPD <AUD2million
OR
Eligible for Simplified Transfer Pricing Record Keeping (STPRK) criteria for small taxpayers
OR
Eligible for STPRK criteria for materiality.
2.1.2 Standard (full) Part A UPE and CE in Australia *When reporting entity doesn’t meet the criteria for the short form Local file in 2.1.1, it will be required to complete the local file (which includes the short form local file)
2.1.3 Standard (full) Part B UPE and CE in Australia For each transaction not covered by the exclusions list (material-controlled transactions)
*When reporting entity doesn’t meet the criteria for the short form Local file in 2.1.1, it will be required to complete the local file (which includes the short form local file)
2.2 Master File UPE and CE in Australia Prepare within 12 months after the fiscal year-end of UPE and submit within 28 days upon request by the ATO. Consolidated UPC’s revenue > AUD 1 billion in the preceding fiscal year.
2.3 Country-by-Country (CbC) Report
2.3.1 Country-by-Country (CbC) Report UPE in Australia Prepare within 12 months after the fiscal year-end of UPE and submit within 28 days upon request by the ATO. Consolidated UPC’s revenue > AUD 1 billion in the preceding fiscal year.
2.3.2 CbC Report notification UPE in Australia Prepare within 12 months after the fiscal year-end of UPE and submit within 28 days upon request by the ATO.

Please be aware of below Warning:
The above contents are digested by Evershine R&D and Education Center in October 2021.
Regulations might be changed as time goes forward and different scenarios will adopt different options.
Before choosing options, please contact us or consult with your trusted professionals in this area.

Contact Us

Melbourne Evershine BPO Service Limited Corp.
E-mail: mel4ww@evershinecpa.com
Australia CA Lily Yan, speak both English and Chinese
2/172-176 Rowe St Eastwood, NSW 2122, Australia

or
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