Section G: Taxpayer's declaration

Last updated 9 September 2014

If you do not lodge the schedule with your tax return you must sign and date the schedule.

Only applies to schedules lodged in paper form.

Appendices

Appendix 1: Specified countries and codes

Specified country	Code	Specified country	Code
Andorra	AND	Liechtenstein	LIE
Anguilla	AIA	Marshall Islands	MHL
Antigua and Barbuda	ATG	Mauritius	MUS
Aruba	ABW	Monaco	MCO
Bahamas	BHS	Montserrat	MSR
Bahrain	BHR	Nauru	NRU
Belize	BLZ	Niue	NIU
Bermuda	BMU	Panama	PAN
British Virgin Islands	VGB	Saint Kitts and Nevis	KNA
Cayman Islands	CYM	Saint Lucia	LCA
Cook Islands	COK	Saint Martin (Dutch Part)	SXM
Curacao	CUW	Saint Vincent & the Grenadines	VCT
Cyprus	CYP	Samoa	WSM
Dominica	DMA	San Marino	SMR
Gibraltar	GIB	Seychelles	SYC
Grenada	GRD	Turks and Caicos Islands	TCA
Guernsey	GGY	US Virgin Islands	VIR
Isle of Man	IMN	Vanuatu	VUT
Jersey	JEY
Liberia	LBR

Appendix 2: Country names and codes

Guernsey, Jersey and Isle of Man each have a separate country code.

Country	Code	Country	Code
Afghanistan	AFG	Liberia	LBR
Aland Islands	ALA	Libya	LBY
Albania	ALB	Liechtenstein	LIE
Algeria	DZA	Lithuania	LTU
American Samoa	ASM	Luxembourg	LUX
Andorra	AND	Macau	MAC
Angola	AGO	Macedonia, The Former Yugoslav Republic of	MKD
Anguilla	AIA	Madagascar	MDG
Antarctica	ATA	Malawi	MWI
Antigua and Barbuda	ATG	Malaysia	MYS
Argentina	ARG	Maldives	MDV
Armenia	ARM	Mali	MLI
Aruba	ABW	Malta	MLT
Austria	AUT	Marshall Islands	MHL
Azerbaijan	AZE	Martinique	MTQ
Bahamas	BHS	Mauritania	MRT
Bahrain	BHR	Mauritius	MUS
Bangladesh	BGD	Mayotte	MYT
Barbados	BRB	Mexico	MEX
Belarus	BLR	Micronesia, Federated States of	FSM
Belgium	BEL	Moldova	MDA
Belize	BLZ	Monaco	MCO
Benin	BEN	Mongolia	MNG
Bermuda	BMU	Montenegro	MNE
Bhutan	BTN	Montserrat	MSR
Bolivia	BOL	Morocco	MAR
Bonaire, Saint Eustatius and Saba Islands	BES	Mozambique	MOZ
Bosnia and Herzegovina	BIH	Myanmar (was Burma)	MMR
Botswana	BWA	Namibia	NAM
Bouvet Island	BVT	Nauru	NRU
Brazil	BRA	Nepal	NPL
British Indian Ocean Territory	IOT	Netherlands	NLD
British Virgin Islands	VGB	New Caledonia	NCL
Brunei Darussalam	BRN	New Zealand	NZL
Bulgaria	BGR	Nicaragua	NIC
Burkina Faso	BFA	Niger	NER
Burundi	BDI	Nigeria	NGA
Cambodia	KHM	Niue	NIU
Cameroon	CMR	Norfolk Island	NFK
Canada	CAN	Northern Mariana Islands	MNP
Cape Verde	CPV	North Korea	PRK
Cayman Islands	CYM	Norway	NOR
Central African Republic	CAF	Oman	OMN
Chad	TCD	Pakistan	PAK
Chile	CHL	Palau	PLW
China	CHN	Palestinian Territories	PSE
Christmas Island	CXR	Panama	PAN
Cocos (Keeling) Islands	CCK	Papua New Guinea	PNG
Colombia	COL	Paraguay	PRY
Comoros	COM	Peru	PER
Congo, Democratic Republic of (was Zaire)	COD	Philippines	PHL
Congo, People's Republic of	COG	Pitcairn Island	PCN
Cook Islands	COK	Poland	POL
Costa Rica	CRI	Portugal	PRT
Côte D'Ivoire (Ivory Coast)	CIV	Puerto Rico	PRI
Croatia (Hrvatska)	HRV	Qatar	QAT
Cuba	CUB	Reunion	REU
Curacao	CUW	Romania	ROU
Cyprus	CYP	Russian Federation	RUS
Czech Republic	CZE	Rwanda	RWA
Denmark	DNK	Saint Barthélemy	BLM
Djibouti	DJI	Saint Helena	SHN
Dominica	DMA	Saint Kitts and Nevis	KNA
Dominican Republic	DOM	Saint Lucia	LCA
East Timor (Timor Leste)	TLS	Saint Martin (French Part)	MAF
Ecuador	ECU	Saint Martin (Dutch Part)	SXM
Egypt	EGY	Saint Pierre and Miquelon	SPM
El Salvador	SLV	Saint Vincent and The Grenadines	VCT
Equatorial Guinea	GNQ	Samoa	WSM
Eritrea	ERI	San Marino	SMR
Estonia	EST	Sao Tome and Principe	STP
Ethiopia	ETH	Saudi Arabia	SAU
Falkland Islands (Malvinas)	FLK	Senegal	SEN
Faroe Islands	FRO	Serbia	SRB
Fiji	FJI	Seychelles	SYC
Finland	FIN	Sierra Leone	SLE
France	FRA	Singapore	SGP
French Guiana	GUF	Slovakia (Slovak Republic)	SVK
French Polynesia	PYF	Slovenia	SVN
French Southern Territories	ATF	Solomon Islands	SLB
Gabon	GAB	Somalia	SOM
Gambia	GMB	South Africa	ZAF
Georgia	GEO	South Georgia and the South Sandwich Islands	SGS
Germany	DEU	South Korea	KOR
Ghana	GHA	South Sudan	SSD
Gibraltar	GIB	Spain	ESP
Greece	GRC	Sri Lanka	LKA
Greenland	GRL	Sudan	SDN
Grenada	GRD	Suriname	SUR
Guadeloupe	GLP	Svalbard and Jan Mayen Islands	SJM
Guam	GUM	Swaziland	SWZ
Guatemala	GTM	Sweden	SWE
Guernsey	GGY	Switzerland	CHE
Guinea	GIN	Syria	SYR
Guinea-Bissau	GNB	Taiwan	TWN
Guyana	GUY	Tajikistan	TJK
Haiti	HTI	Tanzania	TZA
Heard and McDonald Islands	HMD	Thailand	THA
Holy See (Vatican City State)	VAT	Timor-Leste (East Timor)	TLS
Honduras	HND	Togo	TGO
Hong Kong	HKG	Tokelau	TKL
Hrvatska (Croatia)	HRV	Tonga	TON
Hungary	HUN	Trinidad and Tobago	TTO
Iceland	ISL	Tunisia	TUN
India	IND	Turkey	TUR
Indonesia	IDN	Turkmenistan	TKM
Iran	IRN	Turks and Caicos Islands	TCA
Iraq	IRQ	Tuvalu	TUV
Ireland	IRL	Uganda	UGA
Isle of Man, The	IMN	Ukraine	UKR
Israel	ISR	United Arab Emirates	ARE
Italy	ITA	United Kingdom	GBR
Ivory Coast (Côte D'Ivoire)	CIV	United States	USA
Jamaica	JAM	United States Minor Outlying Islands	UMI
Japan	JPN	United States Virgin Islands	VIR
Jersey	JEY	Uruguay	URY
Jordan	JOR	Uzbekistan	UZB
Kazakhstan	KAZ	Vanuatu	VUT
Kenya	KEN	Vatican City State (Holy See)	VAT
Kiribati	KIR	Venezuela	VEN
Korea, Democratic People's Republic of (North Korea)	PRK	Vietnam	VNM
Korea, Republic of (South Korea)	KOR	Wallis and Futuna Islands	WLF
Kuwait	KWT	Western Sahara	ESH
Kyrgyzstan	KGZ	Yemen	YEM
Laos	LAO	Zambia	ZMB
Latvia	LVA	Zimbabwe	ZWE
Lebanon	LBN
Lesotho	LSO

Appendix 3: Listed country names and codes

Listed country	Code
Canada	CAN
France	FRA
Germany	DEU
Japan	JPN
New Zealand	NZL
United Kingdom of Great Britain and Northern Ireland	GBR
United States of America	USA

Appendix 4: Activity codes

Activity code	Activity code description
1	Administrative services Activities that relate to an entity's operations but excluding activities relating to financing and production. These activities include: management services back office services administrative services associated with recharge amounts accounting services IT support services human Resources legal accounting.
2	Advisory services Activities involving the provision and receipt of professional advice where a fee is paid for the advice, including: consultancy activities investment advice legal advice.
3	Asset management Activities associated with the management of assets/ funds/ investments. This will be undertaken on a discretionary basis in accordance with an investment strategy, with the entity responsible for: acquiring, monitoring, managing and disposing of traditional and alternate financial products held by the taxpayer or a related party assessing, monitoring and managing the market risks associated with holding these financial products.
4	Borrowing and lending Activities involving the generation of internal and external funding.
5	Brokerage Activities involving the mediation between a buyer and a seller, occurring in a range of products, including: mortgages, where brokers act as intermediaries to sell mortgage loans on behalf of individuals or businesses commodities, where brokers execute orders to buy or sell commodity contracts on behalf of clients investment, where brokers act as intermediaries between investment buyers and sellers.
6	Cash & trade services Activities involving the facilitation of fund transfers and the exchange of goods and services, including: cash management systems (payment processing systems) foreign exchange clearing services trade settlements letters of credit (trade, insurance and export).
7	Construction All construction activities including residential and commercial construction and the construction of utilities and infrastructure.
8	Custody and transaction clearing services Custody is all activities that are associated with the safekeeping of securities for customers, also includes the collection of dividends, interest and proceeds from securities sales. Transaction clearing are all activities associated with the management of post-trading, pre-settlement credit exposures, to ensure that trades are settled in accordance with market rules, including: reporting and monitoring risk margining netting of trades to single positions.
9	Derivatives Activities undertaken in respect of derivatives (a financial instrument derived from some other asset, index, event, value or condition). The overall derivatives market has five major classes of underlying asset: interest rate derivatives (for example, interest rate swaps/options) foreign exchange derivative (for example, currency swaps/options) credit derivatives (for example, credit default swaps/options) equity derivatives (for example, equity swaps/ warrants) commodity derivatives (for example, commodity swaps/gold options).
10	Distribution and sale of goods Goods purchased by a distributor from an international related party.
11	Financing activities Activities involving dealings in financial instruments that would qualify as financial assets or financial liabilities under relevant Australian accounting standards or comparable foreign accounting standards but excludes financial instruments that would meet the definition of a derivative. At the time of this publication, the two key Australian accounting standards relevant to this question include: AASB 132 Financial Instruments: Presentation AASB 139 Financial Instruments: Recognition and Measurement. The relevant amounts may be reported in the financial statements as revenue/gains or expenses/losses, depending on the accounting treatment of your relevant financial assets and financial liabilities (this includes amounts relating to hedging items that are classified in the financial statements as financial assets or financial liabilities). Therefore, for the purposes of this activity code, the terms ‘expenditure’ and ‘losses’ are interchangeable and the terms ‘revenue’ and ‘gains’ are interchangeable.
12	Guarantees Activities associated with contracts under which a party agrees to perform an obligation or discharge a liability of another entity should that entity fail to do so.
13	Insurance and reinsurance Insurance and reinsurance activities include general insurance, life insurance and health insurance.
14	Leasing Activities that relate to agreement between two parties under which one is granted the right to use the property of the other for a specified period of time in return for a series of payments by the user to the owner.
15	Licensing or transfer of intellectual property Activities involving an intellectual property rights owner (licensor) and another entity which is given authorisation to use these rights (licensee) in exchange for an agreed payment (fee or royalty). This includes activities involving: technology license agreements trademark licensing agreements copyright license agreements trademark license agreements franchise agreements sales/purchase of IP.
16	Logistics Activities associated with the managing of a commercial organisation’s supply chain that supports the sourcing, timing and movement of goods and/or services, including: shipping transport storage procurement and sourcing freight scheduling.
17	Manufacturing and sale of goods Activities involved in the sale of goods created by a manufacturing process (excluding agriculture).
18	Media, telecommunications and information services With regard to media and information services, activities associated with the creation, collation and dissemination/distribution of content via: television radio newspapers/journals/magazines (both hardcopy and equivalent electronic versions) books (both hardcopy and equivalent electronic versions) CD and DVD internet other information and communication channels. With relation to Telecommunications, activities associated with the operation, management, maintenance and sale of access to telecommunications infrastructure and networks including: telephony fax or data digital cable/satellite television internet.
19	Primary production/extraction and sale of goods Activities involved in the sale of physical products that have resulted from: the growing of crops, raising of animals, growing and harvesting of timber the extraction of naturally occurring mineral solids, such as coal and ores; liquid minerals, such as crude petroleum; and gases, such as natural gas.
20	Purchase and distribution of goods Goods sold by a distributor to an international related party.
21	Purchase and manufacture of goods Activities associated with the purchase of goods to be used in a manufacturing process (excluding agriculture).
22	Receipt/payment of dividends and distributions from trusts and partnerships
23	Retail trade Activities associated with the retail trade of all goods classifications to end customers through a shopfront or e-commerce website.
24	Sales and marketing services Sales: commission/amounts received or paid in respect of the provision of services to facilitate the sale of goods or services amounts received or paid in respect of transaction, investment and information services carried out on behalf of customers relating to the customer’s securities, financial assets, financial liabilities, portfolios and/or other assets. Marketing: activities that involve acquiring new customers or businesses and maintaining a relationship with them, including advertising brand promotion sales strategies customer support services.
25	Securitisation services Activities involving the packaging of an income by the party entitled to it and the subsequent sale of such income stream to investors.
26	Software and information technology services Activities involved in the support and maintenance of software and technology used by the taxpayer. Activities relating to the ownership of the software and technology are excluded, such as leasing and rental fees.
27	Superannuation Activities associated with providing, funding or offering investment strategies for financial security upon retirement.
28	Technical services Activities involving: engineering project management R&D exploration.
29	Toll manufacturing services Activities involved with the provision of manufacturing services for a fee or price per unit payment, where the manufacturing entity does not take legal title to the inventory or finished goods.
30	Treasury related services Activities involved in the managing of the taxpayer's financial operations, including: transaction, investment and information services relating to securities, financial assets, financial liabilities, portfolios and/or other assets held by yourself or an international related party risk management systems development and review the management of currencies and cash flows complex strategies, policies and procedures relating to the taxpayer finance.
31	Underwriting services Activities involves measuring risk exposure and determining the premium that needs to be charged to insure that risk, including: securities underwriting (underwriter assumes risk in bringing the issue to market by guaranteeing the issuer will receive a certain price when the offering is sold to investors) bank underwriting (underwriting is the detailed credit analysis preceding the granting of a loan, based on credit information furnished by the borrower). Note: Insurance underwriting should be reported under activity code 9 – insurance and reinsurance.
32	Utilities and infrastructure Activities associated with the operation and management of utilities (for example, electricity, gas, water, sewerage) and infrastructure (for example, roads, rail, airports, sea ports).
99	Other All other activities not listed above.

Appendix 5: Main pricing methodologies

The arm's length pricing methodologies should be identified using the codes listed below.

Code	Arm's length pricing method
1	Apportionment of costs This pricing method apportions the costs associated with a controlled transaction among the associated enterprises. However, cases may arise where neither comparable dealings nor data are available to apply to traditional, or profit-based, methods. In these instances, application of an indirect method such as apportionment of costs on the basis of a formula may be applicable.
2	Apportionment of income This pricing method apportions the income associated with a controlled transaction among the associated enterprises. As with code 1, this method may be appropriate where there are neither comparable dealings nor data to apply the traditional, or profit-based, methods to the pricing problem.
3	Comparable uncontrolled price method This traditional transfer pricing method compares the price for property or services transferred in a controlled transaction, that is, with a related international party, to the price that is charged for comparable property or services under the same or similar circumstances in an uncontrolled transaction. Where it is possible to locate comparable uncontrolled transactions, the comparable uncontrolled price method is the most direct and reliable way to apply the arm's length principle. If there is any difference between the prices or the terms or nature of the controlled transaction and the uncontrolled transaction, this may indicate that the dealings of the associated enterprises are not arm's length. Note that intangible and intellectual property transactions present particular problems with regard to comparability, especially where such property is unique or specialised. If you use this method but the comparable uncontrolled price is adjusted to allow for particular circumstances of the controlled dealing, you should still record the adjusted price under this code.
4	Cost-contribution arrangement A cost-contribution arrangement is one where members of a multinational group act in concert for the benefit of each of the participants to: produce or provide goods, intangible property or services acquire these jointly from a third party agree to share the actual costs and risks undertaken. Each participant bears a fair share of the costs and is entitled to receive a fair share of rewards. The concept is akin to a joint venture or partnership. To be consistent with the arm's length principle, the contributors must be satisfied that they can obtain an acceptable rate of return within a timeframe that takes into account their financial and business circumstances. For more information refer to Taxation Ruling TR 2004/1 - Income tax: international transfer pricing - cost contribution arrangements.
5	Cost-plus method This is a traditional transfer pricing methodology. The cost-plus method begins with the costs incurred by the supplier of property or services in a controlled transaction for property transferred or services provided to a related purchaser. An appropriate arm's length cost-plus mark-up is then added to this cost to make an appropriate profit in light of the functions performed and the market conditions. What is arrived at after adding the arm's length cost-plus mark-up to the above costs may be regarded as an arm's length price of the original controlled transaction. This method is probably most useful if: semi-finished goods that are subject to additional manufacturing or assembly are sold between related parties related parties have concluded joint facility agreements or long-term buy-and-supply arrangements the controlled transaction is the provision of services. This method is not suited for high value intangibles. Further analysis can be undertaken by reviewing the cost plus mark-up of the supplier in the controlled transaction. This is done by referencing the cost plus mark-up that the same supplier earns in comparable uncontrolled transactions. The cost plus mark-up that would have been earned in comparable transactions by an independent enterprise may serve as guidance. If a fixed percentage mark-up is applied to the relevant cost base without any benchmarking of that percentage against comparable independent dealings, it is not regarded as cost-plus method.
6	Fixed mark-up applied to cost This method determines the transfer price for a controlled transaction by applying a fixed percentage mark-up to a relevant cost base where the mark-up is not benchmarked against comparable independent dealings. The absence of benchmarking distinguishes this method from the cost-plus method discussed at code 5. Note: The 'fixed mark-up applied to cost' code should be used as described by TR 1999/1 Income tax: international transfer pricing for intra-group services has been utilised to set the pricing of intra group services.
7	Fixed percentage of resale price This pricing method determines the transfer price for a controlled transaction as a fixed percentage of the resale price, where the fixed percentage chosen is not benchmarked against the gross margins earned in comparable independent dealings. The absence of benchmarking distinguishes this method from the resale price method, code 10. Note: The 'fixed percentage of resale price' methodology code should be used as described by TR 1999/1 Income tax: international transfer pricing for intra-group services has been utilised to set the pricing of intra group services.
8	Marginal costing Marginal costing applies only the variable production costs to the costs of a product. This method is often used by companies and multinational enterprise groups for internal cost accounting and management control purposes. Its use in setting transfer prices on international dealings between associated enterprises for tax purposes is acceptable only if pricing on the basis of marginal costs represents an arm's length outcome for the transfer of goods or services into the particular market.
9	Profit split method This is a transactional profit methodology. The profit split method determines the appropriate pricing for transactions by: identifying the combined profit or loss from the dealings between the related parties splitting that combined profit or loss between the related parties. The split of profit or loss between the parties must be made on an economically valid basis that approximates the division of profits in an agreement made at arm's length.
10	Resale price method This traditional transfer pricing method may be appropriate where an enterprise sells a product to a related party who then resells that product to an independent third party. The resale price is reduced by the arm's length resale price margin and may then be regarded after adjustments for other costs associated with the original purchase of the product as an arm's length price of the original transfer of property between the related parties. Further analysis can be undertaken by reviewing the resale price margin of the reseller in the controlled transaction. This is done by referencing the resale price margin that the same reseller earns on items purchased and sold in comparable uncontrolled transactions. The resale price margin earned by an independent enterprise in comparable uncontrolled transactions may also provide guidance. Margins are usually measured at gross profit level, however a comparison undertaken at an intermediate level may be more accurate. A comparison at the net profit level falls under a different methodology - the transactional net margin method. The resale price margin will vary depending on the value added by the reseller. Variables such as functions performed, economic circumstances, assets employed, and risks undertaken should reflect higher margins.
11	Transactional net margin method This is a transactional profit methodology. The transactional net margin pricing method is based on comparisons made at the net profit level between the taxpayer and independent parties in relation to a comparable transaction or dealing. It examines the net profit margin relative to an appropriate base (eg costs, sales or assets) that a taxpayer realises from a controlled transaction. Comparisons at the net profit level can be made on a single transaction or in relation to some aggregation of dealings between associated enterprises.
12	Transactional net margin method (whole-of-entity) The transactional net margin method is discussed at code 11. If after exercising commercial judgement you have decided to aggregate and test the arm’s length nature of multiple international related party dealings through the application of the transactional net margin method on a whole-of-entity basis, then use code 12 as the main pricing methodology. See Appendix 9 for when to use ‘Transactional net margin method (whole-of-entity)’ methodology.
13	Other arm's length methods Use code 13 if your arm's length method is not represented by codes 1 to 12.
14	No transfer pricing method used Use code 14 if no principal transfer pricing method has been used.

Appendix 6: Derivative codes

The type of derivative should be identified using the codes listed below.

Code	Type of derivative
1	Credit default swaps
2	Currency swaps
3	Forwards
4	Interest rate swaps
5	Options
6	Swaps – other
7	Warrant
8	Other

Cross currency interest rate swap transactions are to be included under the code for currency swaps.

Appendix 7: Nature of item codes

Item code	Item code description
1	Company shares
2	Contract manufacturing
3	Contractual interests
4	Deposits/investment assets
5	Derivative portfolio
6	Insurance policies
7	Insurance recapitalisation
8	Intellectual property/intangibles
9	Interests in trust, partnership or other entity type
10	Loan assets
11	Loan liabilities
12	Marketing hubs
13	Real property
14	Shared services
15	Shipping
16	Trading activities
17	Other assets
18	Other functions
19	Other liabilities
20	Other risks

Find out more

Where you believe that more than one item code may apply, use the most appropriate code.

The terms used in these codes should be interpreted in accordance with their ordinary meaning as used in the context of the industry to which the term relates.

End of find out more

Appendix 8: Transferor trust exemption codes

Code	Subsection/section
1	102AAT(1)(a)(i)(A) to (D) The transfer was: made to a non-resident discretionary trust an arm's length transaction undertaken in the ordinary course of business.
2	102AAT(1)(a)(i)(A) to (C) & (E) The transfer was: made to a non-resident discretionary trust an arm's length transaction not undertaken in the ordinary course of business neither the transferor nor its associates were in a position to control the trust (from the time of the transfer until the end of the transferor's current year of income).
3	102AAT(1)(a)(i)(A) to (C) & (F) The transfer was: made to a non-resident discretionary trust made either on or before 12 April 1989 neither the transferor nor its associates were in a position to control the trust (from 12 April 1989 until the transferor's current year of income). This exemption will not apply to transfers made in the last three income years.
4	102AAT(1)(a)(ii)(A) to (C) The transfer was: made to a non-resident non-discretionary trust made either on or after 12 April 1989 for a consideration equal to or greater than the arm's length amount.
5	102AAT(1)(a)(ii)(A), (B) & (D) The transfer was: made to a public unit trust (that is a non-resident trust estate) made either on or after 12 April 1989 for a consideration equal to or greater than the arm's length amount the sole purpose of the transaction was the arm's length acquisition of units in a public unit trust.
6	102AAZE De minimis exemption The transfer was made to a non-resident trust that is a resident of a listed country and the total of the attributable incomes of all non-resident trust estates is equal to or less than the lesser of either: $20,000 10% of the total of the net incomes of the trust estates.

Appendix 9: Percentage of dealings with documentation

'Percentage of dealings with documentation' refers to the aggregate dollar amount of transactions reported at specific questions in the schedule for which you have relevant documentation expressed as a percentage of total dollar value of transactions reported at each specific question.

Transfer pricing documentation

For income years commencing on or after 29 June 2013, section 284-250 of Schedule 1 to the Taxation Administration Act 1953 provides that a particular way of applying Subdivision 815-B of the ITAA 1997 is not reasonably arguable for the purpose of applying Division 284 of Schedule 1 to the Taxation Administration Act 1953 (concerning administrative penalties) unless the entity meets the documentation requirements in section 284-255.

We advocate through various guides, a four-step process that links the arm's length principle, questions of comparability and the transfer pricing methodologies.

There is a business risk of a transfer pricing review if you do not have proper processes to determine arm's length prices and cannot demonstrate to us the methods used to determine the prices. Arm's length conditions are the conditions that might be expected to operate between independent entities dealing wholly independently with one another in comparable circumstances. Documentation is only one factor in determining whether to commence a review.

The fourth column, at F items 6 to 18 requires estimates of the percentages of the total dollar value of the related-party international dealings for which you have written documentation.

We will also consider the quantum of the related-party transactions and the commerciality (for instance, the level of profitability). We might choose not to audit a business which has a low dollar value of related-party transactions that appear to be at arm's length prices, even though the business recorded code '1' for percentage of dealings with documentation, because the business did not maintain contemporaneous documentation.

Transfer pricing - the four-step process
Step 1 – accurately characterise the international dealings between related parties in the context of your business and document that characterisation.

Transfer pricing - the four-step process

The selection of arm's length pricing methods for your related-party international dealings is discussed in step 2 of TR 98/11.

We recommend you maintain documented records that support your international dealings in determining that the arm's length principle has been applied.

The type of documentation required in international dealings is discussed in TR 98/11.

Contemporaneous documentation

Documentation is contemporaneous if:

it is existing or brought into existence either:
- at the time you are developing or implementing any arrangement that might raise transfer pricing issues
- when you are reviewing these arrangements prior to or at the time of the preparation of tax returns
the documentation records information relevant to transfer pricing decisions.

The documentation may be in the form of books, records, studies, budgets, plans and projections, analyses, conclusions and other material that record the information. It may be in electronic or written form.

The initial analysis of your international dealings against the arm's length conditions will have been carried out and documented at the time of engaging in the dealings. To review those international dealings before you prepare your tax returns is prudent business practice.

To determine the code for the percentage of your dealings with international related parties

At F items 5 to 13, and 17 specify the code for the percentage of your dealings with international related parties for which you have supported the arm's length outcome with written documentation. Write the relevant code from the table below.

If after exercising commercial judgement you have decided to aggregate and test the arm’s length nature of multiple international related party dealings through the application of the transactional net margin method on a whole-of-entity basis, then do both of the following:

write code 12 at E to show ‘transactional net margin method on a whole-of-entity’ as the main pricing methodology.
write the applicable code from the list below at label F to indicate the percentage of dealings with documentation for questions 5 to 13, and 17.

If, in exercising your commercial judgement you decide not to apply a whole of entity transactional net margin method analysis, you should test and document your international related party dealings separately and use one of the following numeric codes to state the percentage of the total of the dollar value for which you have documentation.

Percentage	Code
0%	1
1% to less than 25%	2
25% to less than 50%	3
50% to less than 75%	4
75% to less than 100%	5
100%	6

You may calculate the percentage on the basis of a reasonable estimate.

A statistical sample may be an appropriate method of calculating the relevant percentage, provided the sample selection and mathematical consideration are consistent with generally accepted statistical methods.

Keep your working papers if you have used a sampling process to make this estimate.

Appendix 10: Capital asset pricing methodologies

The capital asset pricing methodologies should be identified using the codes listed below.

Pricing method	Code
Cost price	1
Directors valuation	2
Discounted cash flow	3
Independent valuation	4
Nil consideration	5
Quoted market price	6
Written-down value	7
Other methods	8

Cost price is the price the seller originally paid for the asset, including ancillary costs such as freight or handling.

Written-down value is a pricing method based on either the taxation 'adjustable value' or accounting residual value after depreciation has been allowed.

Discounted cash flow is a pricing method where the price of an asset is based on the discounted cash flow at the time of acquisition or disposal.

Director's valuation is a pricing method that is based on the directors' opinion of an asset's value, and not on any of the other methods listed in codes 1 to 8.

Independent valuation is a pricing method by which a suitably qualified person, acting at arm's length to both the buyer and seller, assesses the value of an asset.

Quoted market price is a price quoted on a public listed market, such as a public stock exchange, or commodities market.

Other methods means any other pricing method that is not mentioned in item 6.

The above pricing methods may not provide an arm's length price under all circumstances. The above examples are not an exhaustive list.

Appendix 11: Capital value of a restructure

Use one of the following numeric codes to state the total of the dollar value of the restructure.

Range	Code
$0 to less than $10 million	1
$10 million to less than $50 million	2
$50 million to less than $100 million	3
$100 million to less than $500 million	4
$500 million or greater	5

The dollar amounts or values asked for in this question are all based on your existing accounting records. For these transactions we ask you to make a reasonable determination of the value and we do not expect you to obtain a formal valuation for this purpose. Keep your working papers if you have made a reasonable determination.

QC40121