Our focus
We focus on non-arm’s length conditions in connection with cross-border dealings and arrangements that allow an Australian entity to gain a transfer pricing benefit. For information on the basic concepts of international transfer pricing and risks, see International transfer pricing – concepts and risk assessment.
Related party service arrangements
We are seeing instances of related-party service fees being paid offshore that don't meet the benefits tests required for deductibility in accordance with TR 1999/1 concerning transfer pricing for intra-group services.
Mischaracterisation of management services
We are concerned with arrangements that mischaracterise transactions as the provision of management services where all functions in relation to the offshore entity are either performed by staff in Australia or outsourced to third party providers that are directed by the Australian employees. These arrangements may cause a transfer pricing benefit to arise and may trigger other anti-avoidance provisions.
Customer and supplier contracts or relationships moved offshore
We are concerned with arrangements where pre-existing customer and supplier contracts or relationships are moved from an Australian entity to an offshore entity creating a transfer pricing benefit. We will seek to understand the commercial rationale for the change and seek evidence to support the arm's length nature of the transaction.
Shifting Australian assets or operations offshore
We are concerned about business restructures that shift Australian assets or operations offshore without arm's length compensation or appropriate recognition for their inherent underlying commercial value.
Offshore hubs that derive high profits
We are concerned about offshore hubs that derive high profits from marketing or procuring goods or services for Australian operations.
PCG 2017/1 ATO compliance approach to transfer pricing issues related to centralised operation models involving procurement, marketing, sales and distribution functions sets out our compliance approach to transfer pricing issues related to the location and relocation of certain business activities and operating risks into a centralised operating model.
For information on record keeping see PCG 2017/2 Simplified transfer pricing record-keeping options.