If you have international transactions with a related party – such as a loan from your foreign subsidiary – your Australian tax can be affected if the amounts for the transaction don't comply with the arm's length principle under the transfer pricing rules.
Some multinational businesses attempt to shift their profits to low-tax jurisdictions by setting unrealistic prices for their actual commercial or financial dealings with their related parties.
Businesses with related party international dealings may have their transfer pricing reviewed or audited by us, with the possibility of pricing adjustments and penalties.
The more significant and broader the scope of a business's international dealings with related parties, the more likely we are to review those dealings. Businesses with significant levels of dealings whose tax performance is low compared to industry standards are at the greatest risk of review.
See also:
- International transfer pricing - introduction to concepts and risk assessment
- COVID-19 economic impacts on transfer pricing arrangements
- Transfer pricing arrangements and JobKeeper payments