Local file/master file 2017

This document provides an in-depth description and explanation of the information requirements of the local file and master file for 2017.

Find out about:

• Local file
• Master file
• Detailed design
• Appendixes

Local file

Overview

The local file comprises two tiers as outlined in Table 1. The amount of information required for a particular tier reflects the entity’s business operations, complexity and perceived level of risk.

Reference is made to two lists:

1. Short form exceptions list – details specific types of transactions that if engaged in by the reporting entity, will mean it will not be eligible to complete the short form local file.
2. Exclusions list – only relevant for those entities lodging a local file, and identifies transactions that are not material controlled transactions for the purposes of Part B of the local file.

Table 1: Local file tiers

File type	Criteria
Short form local file	The reporting entity is only required to provide the short form local file to us if it meets at least one of the following criteria: the aggregate value of its international related party dealings (IRPDs) is less than A$2 million and it has no international related party dealings (IRPDs) on the short form exceptions list the simplified transfer pricing record keeping (STPRK) criteria for small taxpayers and it has no IRPDs on the short form exceptions list the STPRK criteria for materiality and it has no IRPDs on the short form exceptions list.
Local file	Where the reporting entity doesn't meet the criteria for the short form local file, it will be required to complete the local file (which includes the short form local file).

Table 2 provides an overview of the information requirements of the two tiers of the local file.

Table 2: Information requirements overview

File type	Information content
Short form local file	Reporting entity description: a description and copy of the organisational structure of the reporting entity, including a description of the individuals to whom local management reports and the countries in which such individuals maintain their principal offices a description of the reporting entity’s business and strategy a description of any business restructures affecting the reporting entity in the current or previous income year, and an explanation of its significance a description of any transfers of intangibles in the current or previous income year, and an explanation of its significance a list of key competitors of the reporting entity. Refer to the Local file – short form instructions for more information.
Local file	The local file consists of the information in the short form local file, plus controlled transactions and financial information. Controlled transactions – Part A The following information for all controlled transactions for the income year: Australian counterparty tax file number (TFN) or Australian business number (ABN) name of the non-resident counterparty country of tax residence of the non-resident counterparty transaction category amounts of consideration payable/receivable (of a capital nature for Australian income tax purposes) amounts of expenditure/revenue (not of a capital nature for Australian income tax purposes) for international related party (IRP) debt factoring and securitisation arrangements, the book value of transferred debts where foreign currency gains or losses are incurred for the transaction, disclosure of the FX gains or losses the transfer pricing method or capital asset pricing methodology relied on for the transaction the transfer pricing documentation code/STPRK for the purposes of Part B, whether the transaction is covered by a category on the exclusions list. Note: In the case of an agreement included in a relevant agreement series (RAS), all the agreements covered by the RAS are aggregated for the purpose of completing Part A. Zero values are shown for nil payment or consideration (as per item 14a of the international dealings schedule (IDS)). There is an indicator for non-monetary consideration (as per item 14b of the IDS).   Material controlled transactions – Part B For each transaction not covered by the exclusions list (material-controlled transactions): the transfer pricing method relied on for the transaction by the IRP (or an indication the reporting entity was not able to obtain the information) an indication whether there is a written agreement and, if so, whether the agreement has been previously provided to us (where it has been previously provided, we will require the title of the agreement to enable ATO identification) a copy of the agreement (unless previously provided to us) any foreign APAs or rulings provided by another jurisdiction in relation to an agreement (unless previously provided to us). Note: There are special rules for providing agreements included in a RAS, see Local file – Part B: Guidance on providing International Related Party agreements   Financial information Highest quality financial accounts for the Australian reporting entity.

What is an IRP and IRPD?

For the purposes of the local file, we are adopting the definitions of International related parties (IRP) and International related party dealings (IRPD) as used in the international dealings schedule (IDS).

IRPs are persons who are not dealing wholly independently with one another in their commercial or financial relations and whose dealings or relations can be subject to Subdivision 815-B of the Income Tax Assessment Act 1997 (ITAA 1997) or the associated enterprises article of a relevant double tax agreement (DTA).

There cannot be a transfer pricing benefit under subsection 815-120(1) or pursuant to Article 9 of a relevant tax treaty if the conditions of a relevant entity’s commercial or financial dealings are inherently not capable of affecting the amount of the entity’s taxable income, losses, tax offsets or withholding tax under Australian income tax law.

Whether the conditions of an entity’s commercial or financial dealings with the entity’s offshore subsidiary in the course of the entity’s business operations carried on, at or through the entity’s offshore permanent establishment (PE) would be capable of affecting the entity’s taxable income, losses, offsets or withholding tax under Australian income tax law would depend on all the relevant facts and circumstances, including the nature and duration of the relevant dealing.

Duplication (administrative solution)

If a reporting entity chooses to voluntarily lodge Part A of their local file at the same time as their tax return, they will not need to complete the relevant IRPD labels in Questions 2 to 17 of the IDS. Part B of the local file must be lodged by the statutory due date (per 815-355(2) of the (ITAA 1997).

If the reporting entity has already provided relevant agreements to us, they do not need to provide the agreements to us again through the local file. The XML schema for Part B of the local file includes a provision for notifying us if an agreement has already been provided.

Short form exceptions list

Where the reporting entity has the IRP transactions or dealings of the kinds listed below, they are not eligible for the short form local file, since a low value for these transactions is not necessarily reflective of the level of risk:

• Any derivative including without limitation any swap, forward, future or option in respect of values determined in connection with interest rates, currency, commodities or other assets.
• Any legal or equitable assignment of trademark, patent, design, copyright, other intellectual property or similar property or rights, or any part thereof.
• Any licence or other grant of use or right to use a trademark, patent, design, copyright, other intellectual property, secret formula or process or similar property or rights.
• IRPDs of a capital nature.

Exclusions list

The exclusions list outlines categories of agreements which are considered to not materially affect the application of Subdivision 815-B of the ITAA 1997, or where agreements are not otherwise required. Part B of the local file is not required for the following agreements.

Agreements relating to transactions eligible for Simplified transfer pricing record keeping

Agreements covered by the following STPRK options you have chosen to apply the:

• intra-group services STPRK option
• management and administration services STPRK option
• technical services STPRK option
• low-level inbound loans STPRK option
• low-level outbound loans STPRK option.

For avoidance of doubt, in applying the criteria in this exclusion list we confirm IRPD transactions involving recharge or reimbursement of costs are also categorised by what is obtained or provided under the IRPD in exchange for the recharged or reimbursed amounts.

For example:

• An IRPD recharge or reimbursement arrangement involving ‘reimbursement’ of your costs for insurance you provide to your IRP is treated as an Insurance transaction.
• An IRPD recharge or reimbursement arrangement involving ‘recharge’ of your IRP’s costs for services provided by the IRP to you in connection with the IRP organising or managing your third party insurance contracts is treated as an Insurance Services transaction.

Reimbursement under employee secondment agreements

To be excluded, the agreement must satisfy the following criteria:

• the agreement solely covers        
  • reimbursement of salary or other costs in connection with secondment of natural persons
  • rights and obligations in connection with effecting the employment or engagement of the natural persons by the party obtaining the seconded employee.
   
• the persons who are employed do not perform services for more than one party to the agreement at the same time
• the business operations of the party providing the seconded employee do not include providing consultancy services, personnel services or staff engagement services to unrelated parties.

Low value or low risk service agreements

To be excluded, the agreement must satisfy the following criteria:

• the agreement solely covers        
  • the provision or receipt of services
  • rights and obligations in connection with effecting the provision or receipt of services
   
• the services are not provided in connection with use or enjoyment of any trademark, patent, design, copyright, other intellectual property, secret formula or process or similar property rights
• the services are not provided in connection with any other IRP agreement
• the total amount deducted in the income year in connection with the agreement or Relevant agreement series (as applicable) is less than either        
  • A$2 million
  • 2% of IRPD expenses
   
• the total amount returned in the income year in connection with the agreement or Relevant Agreement Series (as applicable) is less than either        
  • A$2 million
  • 2% of IRPD revenue.
   

Low value or low risk sale and purchase tangible trading stock agreements

To be excluded, the agreement must satisfy the following criteria:

• the agreement solely covers either        
  • the sale or purchase of tangible trading stock
  • rights and obligations in connection with effecting the sale or purchase of tangible trading stock
   
• the tangible trading stock provided or received, is not provided or received in connection with use or enjoyment of any trademark, patent, design, copyright, other intellectual property, secret formula or process or similar property rights
• the tangible trading stock is not provided or received in connection with any other IRP agreement
• the total amount deducted in the income year in connection with the agreement or Relevant Agreement Series (as applicable) is less than either          
  • A$2 million
  • 2% of IRPD expenses
   
• the total amount returned in the income year in connection with the agreement or Relevant Agreement Series (as applicable) is less than either        
  • A$2 million
  • 2% of IRPD revenue.
   

Issue of ordinary shares

To be excluded, the agreement must satisfy the following criteria:

• the agreement solely covers        
  • acquisition by the reporting entity of ordinary shares, by way of issue of new shares by the company
  • issue of ordinary shares by a reporting entity which is a company.
   

Additional information

Refer to the following for more information on the local file:

• Local file instructions 2017
• Local file – Part B: Guidance on providing International Related Party agreements