Section A: International related party dealings

Question 1a Country-by-Country reporting

Country-by-Country (CbC) reporting under Subdivision 815-E of the Income Tax Assessment Act 1997 (ITAA 1997) requires relevant entities, such as CbC reporting entities in relation to income years or periods commencing on or after 1 July 2019 to provide 3 statements to the Commissioner:

• a CbC report
• a master file
• a local file.

For more guidance on CbC reporting and country by country reporting entities, see Country-by-Country reporting.

If Country-by-Country reporting applies to you, answer Yes and go to question 1b.

Question 1b Local file – Part A

If Country-by-Country reporting applies to you, and you have lodged Part A of your local file at the same time as your income tax return, answer Yes and go to question 18.

For more information about the local file, see Country-by-Country reporting.

Question 2a International related party dealings

If during 2022–23, the aggregate amount of your international related party dealings, including the value of any property or services transferred or the balance of any loans, exceeded $2 million, answer Yes and go to question 2b.

This aggregate amount is based on your accounting records.

International related party dealings do not include any 'dealings' with your own branch operations

Questions 2 to 17 collect information in connection with your international related party dealings.

International related party dealings are international commercial or financial dealings or relations between 2 or more related persons. This includes back-to-back arrangements involving 2 or more connected transactions involving you and one or more related persons.

For example, international related party dealings include:

• an agreement with your foreign subsidiary
• you borrowing from a foreign bank taken together with a relevantly connected loan to the foreign bank from your overseas holding company.

International related party dealings will therefore not include any 'dealing' or commercial or financial relations with your own branch operations.

Question 2b Small business entity

If you are a small business entity, are not a significant global entity, and your international related party dealings do not exceed $5 million and 50% of your 2022–23 aggregated turnover, answer Yes and go to question 18.

Otherwise answer No and go to question 3.

If during 2022–23, the aggregate amount of your international related party dealings (including the value of any property or services transferred or the balance of any loans) exceeded $5 million, you do not need to determine whether your international related party dealings exceeded 50% of your current year aggregated turnover, answer No and go to question 3.

To work out whether you are a small business entity and for more information about calculating your aggregated turnover, see Small business entity concessions – Eligibility.

For information about significant global entities, see Significant global entities.

Question 3 Dealings with related parties not in specified countries

To evaluate and monitor the compliance risks in respect of Australian taxpayers' international related party dealings, apart from those in specified countries or jurisdictions, we need to identify the principal countries or jurisdictions where those dealings are undertaken and identify the nature and significance of the activities undertaken in those countries or jurisdictions.

The dollar amounts or values asked for in this question are all based on your accounting records.

Only dealings conducted on your own behalf need to be taken into account in the answer to this question. Do not include dealings on behalf of your clients.

The amounts reported at this question may be reported in the financial statements as revenue and gains or expenses and losses, depending on the accounting treatment of the relevant question.

For example, for derivatives:

• you may report revenue or expenses from net cash flows, or
• you may report a gain or loss in fair value.

Therefore, for the purposes of this question, the terms:

• expenditure and losses are interchangeable
• revenue and gains are interchangeable.

For more information about how to determine the amounts to be included in respect of derivatives, see Question 9.

To complete this question:

• identify all your international related party dealings during 2022–23
• disregard all your international related party dealings of a non-revenue (capital) nature, such as dividends or other distributions of profit on ordinary shares or equity interests of a non-revenue nature
• disregard all your dealings with related parties located in specified countries or jurisdictions
• group your remaining dealings according to the country or jurisdiction where the related party is located
• total the dollar value of your dealings (the total amount of expenses and losses plus the total amount of revenue and gains, excluding principal and principal repayment amounts) for each country or jurisdiction
• determine the 3 countries or jurisdictions that have the highest dollar value of related party dealings
• in respect of the 3 countries or jurisdictions with the highest dollar value of international related party dealings, group the dealings in each of the countries or jurisdictions according to activity type
• total the dollar value of your dealings (expenses and losses plus revenue and gains, excluding principal and principal repayment amounts) for each activity type
• calculate the 3 activity types with the highest dollar value for each of the 3 countries or jurisdictions.

If you had international related party dealings during 2022–2023, disregarding your dealings with parties located in any of the specified countries or jurisdictions listed in Appendix 1, answer Yes at question 3 – label A and complete the following:

• At labels B, H and N, write the Appendix 2 codes for the 3 countries or jurisdictions with the highest dollar value in respect of your dealings with international related parties located in countries or jurisdictions apart from specified countries or jurisdictions. Write these codes in descending order of total dollar value.
• At labels C, I and O, write the Appendix 4 codes for the 3 activity types with the highest dollar value of international related party dealings in relation to each of the countries or jurisdictions you have identified. Write these codes in descending order of total dollar value.
• At labels D, J and P, write the total amount of expenditure and losses incurred (excluding principal and principal repayment amounts) in respect of each activity type you have identified in relation to the relevant country or jurisdiction identified.
• At labels E, K and Q, write the total amount of revenue and gains earned (excluding principal and principal repayment amounts) in respect of each activity type you have identified in relation to the relevant country or jurisdiction identified.
• At labels F, L and R, write the total of all other amounts of expenditure and losses for international related party dealings for the relevant country or jurisdiction identified.
• At labels G, M and S, write the total of all other amounts of revenue and gains for international related party dealings for the relevant country or jurisdiction identified.

Question 4 Dealings with related parties in specified countries

To evaluate any potential compliance risks in respect of Australian taxpayers' international related party dealings in specified countries or jurisdictions, we need to understand the nature of these dealings. Therefore, we seek to identify the principal activities undertaken by Australian taxpayers and related parties in specified countries or jurisdictions, where these activities are mainly undertaken and the extent or significance of these activities.

The dollar amounts or values we ask for in this question are all based on your accounting records.

Only dealings conducted on your own behalf need to be taken into account in your answer to this question. Do not include dealings on behalf of your clients.

For more information about how to determine the amounts to be included in respect of derivatives, see the instructions for Question 9.

To complete this question:

• identify all your international related party dealings located in specified countries or jurisdictions during 2022–23
• disregard all your international related party dealings of a non-revenue (capital) nature, such as dividends or other distributions of profit on ordinary shares or equity interests of a non-revenue nature
• group your dealings according to the country or jurisdiction where the related party is located
• total the dollar value of your dealings (expenses and losses plus revenue and gains, excluding principal and principal repayment amounts) for each country or jurisdiction
• determine the 3 countries or jurisdictions that have the highest dollar value of related party dealings
• then, in respect of the 3 countries or jurisdictions with the highest dollar value of international related party dealings, group the dealings in each of the countries or jurisdictions according to activity type
• total the dollar value of your dealings (expenses and gains plus revenue and losses, excluding principal and principal repayment amounts) for each activity type
• calculate the 3 activity types with the highest dollar value for each of the 3 countries or jurisdictions.

If you had related party dealings with entities in any of the specified countries or jurisdictions listed in Appendix 1, during 2022–23, answer Yes at question 4 – label A and complete the required fields:

• At labels B, H and N, write the Appendix 1 codes for the 3 specified countries or jurisdictions with the highest dollar values for your dealings with international related parties located in specified countries or jurisdictions. Write these codes in descending order of total dollar value.
• At labels C, I and O, write the Appendix 4 codes for each of the 3 activity types with the highest dollar value for your international related party dealings for each of the 3 specified countries or jurisdictions. Write these activity codes in descending order of total dollar value for each of the 3 activity types for each specified country or jurisdiction.
• At labels D, J and P, write the total amount of expenditure and losses incurred (excluding principal and principal repayment amounts) for each of the activity types for the specified country or jurisdiction for which you have written the activity code (at labels C, I and O).
• At labels E, K and Q, write the total amount of revenue and gains earned (excluding principal and principal repayment amounts) for each of the activity types for the specified country or jurisdiction for which you have written the activity code (at labels C, I and O, respectively).
• At labels F, L and R, write the total of all other amounts of expenditure and losses for international related party dealings for the relevant specified country or jurisdiction for which you have written the country or jurisdiction code (at labels B, H and N, respectively).
• At labels G, M and S write the total of all other amounts of revenue and gains for international related party dealings for the relevant specified country or jurisdiction for which you have written the country or jurisdiction code (at labels B, H and N, respectively).

Question 5 Tangible property dealings

The intent of this question is to identify whether the taxpayer has any international related party dealings involving tangible property of a revenue nature, including trading stock and raw materials, and if so, to quantify those dealings and to ascertain the extent to which the taxpayer has transfer pricing documentation to support those dealings.

The dollar amounts or values asked for in this question are all based on your accounting records.

The definition of trading stock in Division 70-10 of the ITAA 1997 should be used to determine what trading stock is for the purpose of this question.

Internal trading stock transfers to or from your own branch operations should instead be included at question 18 of the schedule. See, International related party dealings, do not include any 'dealings' with your own branch operations.

If you had related party dealings involving tangible property of a revenue nature, including trading stock and raw materials, answer Yes at question 5 – label A and complete the required fields:

• At label C, write the amount of your gross purchases or expenditure for tangible property of a revenue nature, including trading stock and raw materials obtained from international related party dealings.
• At label D, write the amount of your gross sales or revenue from tangible property of a revenue nature, including trading stock and raw materials provided to international related parties. These amounts will typically be included in trading account items, and will include partially finished goods.
• At label E, write the Appendix 5 code for the principal arm's length pricing method used to value intangible property of a revenue nature, including stock in trade and raw materials transactions.
• At label F, write the Appendix 9 code for the percentage of these dealings involving tangible property of a revenue nature, including trading stock and raw materials, for which you have documentation.

Percentage of dealings with documentation refers to the aggregate dollar amount of transactions reported at this question for which you have relevant documentation expressed as a percentage of total dollar value of transactions reported at this question. If you applied one of the simplified record-keeping options in the PCG 2017/2 Simplified transfer pricing record-keeping options for these dealings involving tangible property of a revenue nature, including trading stock and raw materials, write code 7 at label F.

Question 6 Royalties or licence fees

This question seeks information to assess transfer pricing risks arising from royalty and licence fee arrangements between Australian taxpayers and international related parties. We seek to determine the level of these transactions between Australian taxpayers and their international related parties, identify the pricing methodology used in relation to these arrangements and to ascertain the extent to which the taxpayer has transfer pricing documentation to support those dealings.

The dollar amounts or values asked for in this question are all based on your income tax records.

For the purpose of this question royalty or royalties is as defined in subsection 6(1) of the ITAA 1936 and in any applicable double tax agreement in the International Tax Agreements Act 1953 (Schedule 1 – Taipei Agreement) or the Australian Treaty Series. Where there is a conflict between the definition of royalty in subsection 6(1) of the ITAA 1936 and the definition in an applicable double tax agreement, use the definition in the double tax agreement (see subsection 4(2) of the International Tax Agreements Act 1953).

Licence fee refers to any dealings involving the grant or use of a licence, excluding dealings where consideration is a royalty shown at question 6a.The term licence fee has its ordinary meaning.

If you had international related party dealings involving royalties or licence fees during 2022–23, answer Yes at question 6 – label A and complete the required fields.

Question 6a is completed as follows:

• At label C, write the total amount of royalties payable by you to international related parties claimed as deductions for the income year.
• At label D, write the total amount of royalties you derived from international related parties included in your assessable income for 2022–23.
• At label E, write the Appendix 5 code for principal arm's length pricing method used to set or review consideration for the royalties payable by or derived by you.
• At label F, write the Appendix 9 code for the percentage of your international related party dealings involving royalties for which you have documentation.

Percentage of dealings with documentation refers to the aggregate dollar amount of transactions reported at this question for which you have relevant documentation expressed as a percentage of total dollar value of transactions reported at this question.

Question 6b is completed as follows:

• At label C, write the total amount of licence fees payable by you to international related parties claimed as deductions for 2022–23.
• At label D, write the total amount of licence fees you derived from international related parties included in your assessable income for 2022–23.
• At label E, write the Appendix 5 code for principal arm's length pricing method used to set or review consideration for the licence fees payable by or derived by you.
• At label F, write the Appendix 9 code for the percentage of your international related party dealings involving licence fees for which you have documentation.

Percentage of dealings with documentation refers to the aggregate dollar amount of transactions reported at this question for which you have relevant documentation expressed as a percentage of total dollar value of transactions reported at this question.

Question 7 Rent or leasing

This question seeks information to assess transfer pricing risks arising from rent or leasing arrangements between Australian taxpayers and international related parties. We seek to determine the level of these transactions between Australian taxpayers and their international related parties and identify the pricing methodology used in relation to these arrangements.

Rent and lease or leasing have their ordinary meaning and will include hiring of chattels.

The dollar amounts or values asked for this question are all based on your accounting records.

If you had international related party dealings involving rent or leasing during 2022–23, answer Yes at question 7 – label A and complete the required fields:

• At label C, write the total amount of rent and leasing charges or fees incurred by you in your dealings with international related parties.
• At label D, write the total amount of rent and leasing income you earned or derived from your dealings with international related parties.
• At label E, write the Appendix 5 code for principal arm's length pricing method used to set or review consideration for the rent and leasing arrangements with international related parties.
• At label F, write the Appendix 9 code for the percentage of your international related party dealings involving rent or leasing for which you have documentation.

Percentage of dealings with documentation refers to the aggregate dollar amount of transactions reported at this question for which you have relevant documentation expressed as a percentage of total dollar value of transactions reported at this question. If you applied one of the simplified record-keeping options in PCG 2017/2 Simplified transfer pricing record-keeping options for these dealings, write code 7 at label F.

Question 8 Service arrangements

Transfer pricing risks arise in respect of service arrangements between Australian taxpayers and international related parties. To quantify these risks we need to identify the nature and significance of these service arrangements and the pricing methodology used, and ascertain the extent to which the taxpayer has transfer pricing documentation to support those dealings.

If you had international related party dealings regarding service arrangements during 2022–23, answer Yes at question 8 – label A and complete the required fields.

For your international dealings involving each type of services covered by questions 8a to 8j, complete each of those questions as follows:

• At label C, write the total amount of expenditure you incurred for the service type.
• At label D, write the total amount of revenue you earned or derived for the service type.
• At label E, write the Appendix 5 code for the principal arm's length pricing method used to set or review consideration for the service type.
• At label F, write the Appendix 9 code for the percentage of the international dealings for the service type for which you have documentation.

Percentage of dealings with documentation refers to the aggregate dollar amount of transactions reported at this question for which you have relevant documentation expressed as a percentage of total dollar value of transactions reported at this question. If you applied one of the simplified record-keeping options in PCG 2017/2 Simplified transfer pricing record-keeping options for your service arrangements, write code 7 at label F at the corresponding question.

The dollar amounts or values asked for in this question are all based on your accounting records.

You must report the total amount of expenditure you incurred, and total amount of revenue you earned or derived, for each category of services with international related parties at questions 8a to 8k. For example, report the total amount of expenditure incurred and the revenue earned or derived in respect of each service category with your international related parties, not the mark-up on costs of services you received or provided in service arrangements with your international related parties.

In completing this question, exclude the following amounts, returned:

• at question 6 relating to royalties or licence fees
• at question 9 relating to derivative transactions
• at question 11 relating to other dealings of a financial nature including any borrowing or lending transactions.

For the purpose of this question, a service arrangement is one that is based on the performance of work by one party for the benefit of another party (see Employers Mutual Indemnity Association Ltd v. Federal Commissioner of Taxation [1943] HCA 36; (1943) 68 CLR 165 per Latham CJ at 174).

The arrangement may be formal or informal. You may be the customer or the provider of the service.

Where the services are bundled in one charge and your accounting records do not separate them into the distinct service categories in this question, you must reasonably allocate the charge to the relevant service categories in questions 8a to 8j. If you are unable to reasonably allocate all of the charge to the service categories in those questions, show the unallocated amount of the charge at question 8k Other services and write a clear description of the nature of the relevant services received. These services are divided into the following categories:

• 8a Treasury related services
• 8b Management and administration services
• 8c Insurance services
• 8d Reinsurance services
• 8e Research and development services
• 8f Sales and marketing services
• 8g Software and information technology services
• 8h Technical services
• 8i Logistics services
• 8j Asset management services

8a 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 or other assets held by yourself or an international related party
• the generation of internal and external funding
• risk management systems development and review
• the management of currencies and cash flows
• complex strategies, policies and procedures relating to the taxpayer's finance.

8b Management and administration services

Management and administration services are activities that:

• involve or relate to the control, facilitation, and monitoring of the taxpayer's human resources (staffing) and financial resources (assets)
• relate to administering the day to day business operations of the taxpayer, including    
  • back office services
  • administrative services associated with employee share-based plans and recharge amounts
  • accounting services.
   

Administration services exclude activities relating to financing, marketing or production.

8c Insurance services

Insurance services are activities associated with the management of insurance contracts (predominantly undertaken through intermediaries). Effectively, the expenditure and revenue will represent intermediaries' commissions for providing an insurance management type service (for example, placement of the insurance portfolio to a third party or providing back office functions).

Show the premiums or other expenditure incurred or revenue earned or derived in relation to insurance contracts with international related parties during 2022–23 at question 11e.

8d Reinsurance services

Reinsurance services are activities associated with the management of reinsurance contracts (predominantly undertaken through intermediaries). Effectively, the expenditure and revenue will represent intermediaries' commissions for providing an insurance management type service in relation to reinsurance contracts (for example, placement of the insurance portfolio to a third party or providing back office functions).

Show the premiums or other the expenditure incurred or revenue earned or derived in relation to reinsurance contracts with international related parties during 2022–23 at question 11f.

8e Research and development services

Research and development services are activities associated with the undertaking of research and development services on behalf of a contracting party on a systematic basis in order to develop intellectual property, where the entity providing the research and development services does not take title to any resultant intellectual property created in the provision of the service.

8f Sales and marketing services

Sales and marketing services include provision of services to facilitate the sale of goods or services, and 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 services include activities that involve acquiring new customers or business and maintaining a relationship with them, including:

• advertising
• brand promotion
• sales strategies
• customer support services.

8g Software and information technology services

Software and information technology services are 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.

8h Technical services

Technical services are activities associated with engineering, architecture, design, project management and mining exploration.

8i Logistics services

Logistics services are activities that relate to transport, freight, storage, scheduling, sourcing and procurement.

8j Asset management services

Asset management services are activities associated with the management of assets, funds or investments undertaken on a discretionary basis in accordance with an investment strategy, with the provider of the services responsible for both of the following:

• acquiring, monitoring, managing and disposing of traditional and non-traditional financial products held by the taxpayer or a related party
• assessing, monitoring and managing the market risks associated with holding the financial products.

8k Other services

Other services are all other services not covered by the above categories. Question 8k Other services should only be used for reporting of amounts which are not covered by the categories of service at questions 8a to 8j.

To complete this question, you must:

• identify all service arrangements between you and international related parties
• group the service arrangements into one of the eleven service categories (including the service arrangement category referred to as Other)
• calculate the total amount of expenditure incurred and the revenue earned or derived in respect of each service category
• identify the principal arm's length pricing method used to set or review consideration in respect of each service arrangement undertaken with international related parties
• identify the percentage of dealings for which you have documentation
• provide a description of the nature of the service arrangements with international related parties recorded under Other services (if applicable).

For your international dealings involving any other kind of services, complete question 8k as follows:

• At label C, write the total amount of expenditure you incurred for the other kinds of services.
• At label D, write the total amount of revenue you earned or derived for the other kinds of services.
• At label E, write the Appendix 5 code for the principal arm's length pricing method used to set or review consideration for the other kinds of services.
• At label F, write the Appendix 9 code for the percentage of the international dealings for the other kinds of services for which you have documentation.

Percentage of dealings with documentation refers to the aggregate dollar amount of transactions reported at this question for which you have relevant documentation expressed as a percentage of total dollar value of transactions reported at this question. If you applied one of the simplified record-keeping options in PCG 2017/2 Simplified transfer pricing record-keeping options for your service arrangements shown at question 8k, write code 7 at question 8k – label F.

At label H, write a description of the other kinds of services. Limit the description to 200 characters.

Question 9 Derivative transactions

This question collects information about the transfer pricing risks associated with Australian taxpayers' derivative transactions with international related parties. Here you show the total amount for these transactions and an indication of the principal derivative transaction types undertaken.

The dollar amounts or values asked for in this question are all based on your accounting records.

Derivative takes on its ordinary meaning within the context of commercial and accounting practices.

Broadly, a derivative instrument is a contractual right that derives its value from the value of something else, such as a debt security, equity, commodity or specific index. The most common derivative instruments are forwards, options, swaps and credit derivatives. Unlike traditional debt and equity securities, these instruments generally do not involve a return on an initial investment.

The disposal or the acquisition of a derivative would constitute a derivative transaction.

All your derivative transactions with international related parties should be shown at this question, including derivatives entered into for trading, hedging, speculation or arbitrage purposes.

You should not include exchange traded options or exchange traded futures in this question. However, where exchange traded options or futures are not separated from other options or futures in your records they may be included.

Where you use mark-to-market or fair value accounting for financial accounting purposes you may use this method for determining amounts included for derivatives at this question. This will include the net change in fair value of the derivative recorded as a gain or loss in your financial statements for the relevant income year.

For many derivatives (for example, interest rate swaps), the parties to the contract will make payments at regular intervals under the contract. These gross payments should be recorded at this question as captured for accounting purposes. If under the derivative instrument, net cash flows are exchanged at certain specified times during the term of the contract, and only net cash flows are captured for accounting purposes, then the amounts should be included at this question on a net cash flow basis. Principal or notional principal amounts exchanged under the derivatives should not be included.

The net settlement amounts exchanged to close out a forward rate agreement or cross currency swap agreement would be included at this question, but not a principal amount delivered under the agreement.

The amounts payable or derived as option premiums would also be included at this question.

The amounts reported at this question may be reported in financial statements as revenue and gains or expenses and losses, depending on the accounting treatment of your derivatives (and this includes amounts relating to derivatives entered into that are part of a hedging purpose).

Therefore, for the purposes of this question, the terms:

• expenditure and losses are interchangeable
• revenue and gains are interchangeable.

To evaluate the information provided at questions 9a or 9b we need to know whether the Australian taxpayer is conducting derivative trading globally through a trading structure such that profits from the activities are shared with international related parties. Where this is the case there is a transfer pricing risk due to the need to determine the appropriate allocation of profits between the relevant parties. This is the focus of question 9c.

Global trading of financial instruments, including derivatives, is defined by reference to the fact that some part of the business is conducted in more than one tax jurisdiction. This concept of trading derivatives globally is based on the OECD's definition of global trading of financial instruments.

For information about what might constitute global trading, see paragraphs 9 to 11 of the introduction of OECD Document – The Taxation of Global Trading of Financial Instruments (1998). You can buy a copy at OECD iLibraryExternal Link.

To complete this question:

• identify the derivative transactions undertaken with international related parties
• total the expenditure incurred and the revenue earned in respect of these derivative transactions with international related parties
• determine the principal arm's length pricing method used to set or review consideration in respect of these derivative transactions.

If you had derivative transactions with international related parties during 2022–23, answer Yes at question 9 – label A and complete the following at question 9a:

• At label C , write the total amount of expenditure incurred in respect of your derivatives with international related parties.
• At label D, write the total amount of revenue earned or derived in respect of your derivatives with international related parties.
• At label E, write the Appendix 5 code for the principal arm's length pricing method used to set or review consideration in respect of your derivatives with international related parties.
• At label F, write the Appendix 9 code for the percentage of your international related party dealings involving derivatives with international related parties for which you have documentation.

Percentage of dealings with documentation refers to the aggregate dollar amount of transactions reported at this question for which you have relevant documentation expressed as a percentage of total dollar value of transactions reported at this question.

• At question 9b – labels G1, G2 and G3, write the Appendix 6 code for the 3 types of derivative transactions you entered into with international related parties that have the highest dollar value.
• Answer Yes or No at question 9c – label H depending on whether you engaged in the trading of derivatives globally through a trading structure (irrespective of the type of trading model used) such that you share global profits from these activities with international related parties.

Question 10 Debt factoring or securitisation

Debt factoring and securitisation are finance arrangements entered into by an entity to obtain or provide immediate funds in exchange for disposing of certain financial assets. There is a transfer pricing risk in respect of these arrangements in how the value of the assets being transferred between international related parties is determined.

We are seeking to clarify the extent of these finance arrangements between Australian taxpayers and international related parties, the principal arm's length pricing method used to set or review consideration in respect of these arrangements and to ascertain the extent to which the taxpayer has transfer pricing documentation to support those dealings.

Debt factoring and securitisation have their ordinary meanings within the context of commercial practices.

Broadly, debt factoring is a finance arrangement whereby a business sells its accounts receivable to a third party (factor) at a discount to obtain working capital. The factor then collects the receivables from the business's customers. Debt factoring agreements can either be recourse or non-recourse arrangements. With recourse debt factoring, the factor does not assume the risk of bad debts and may seek recourse from the business for any uncollectible debts. With non-recourse debt factoring, the sale of the receivables essentially transfers ownership of the receivables to the factor, such that the factor obtains all of the rights and risks associated with the receivables.

Securitisation is a structured finance arrangement where an entity (the originator) sells a portfolio of financial assets to a special purpose vehicle. To acquire the assets from the originator, the special purpose vehicle issues tradable securities to fund the purchase. Investors purchase the securities, either through a private offering (for example, by targeting institutional investors) or on the open market. The originator will retain a beneficial interest in the performance of the securities and may also receive a service fee.

The dollar amounts or values asked for in this question are all based on your accounting records.

To complete this question, you must:

• identify all the debt factoring arrangements and securitisation arrangements you entered into during 2022–23 with international related parties involving you selling or assigning receivables (outward arrangements).
• in respect of any outward debt factoring arrangements    
  • determine the book value of the receivables sold or assigned to the factor for each of these arrangements
  • calculate the total book value of the receivables for all these arrangements
  • ascertain the consideration or payment amount received from the factor for the receivables, in respect of each debt factoring arrangement
  • calculate the total amount of consideration received in respect of all these transactions
  • specify the principal arm's length pricing method used to set or review consideration in respect of these arrangements
  • specify the code for the percentage of dealings for which you have documentation.
   

Percentage of dealings with documentation refers to the aggregate dollar amount of transactions reported at this question for which you have relevant documentation expressed as a percentage of total dollar value of transactions reported at this question.

• in respect of any outward securitisation arrangements    
  • determine the book value of the assets transferred for each of these arrangements
  • calculate the total book value of the assets for all these arrangements
  • ascertain the amount received from service fees, sales amounts and distributions from the special purpose vehicle arising from the transfer of assets in respect of each securitisation arrangement
  • calculate the total amount of service fees, sales amounts and distributions from the special purpose vehicles arising from all these arrangements
  • specify the principal arm's length pricing method used to set or review the income derived from these arrangements
  • specify the code for the percentage of dealings for which you have documentation.
   

Percentage of dealings with documentation refers to the aggregate dollar amount of transactions reported at this question for which you have relevant documentation expressed as a percentage of total dollar value of transactions reported at this question.

If you entered into any outward debt factoring or securitisation arrangements with international related parties during 2022–23, answer Yes at question 10 – label A and complete the following.

If you entered into any inward debt factoring arrangements during 2022–23 with international related parties involving you acquiring receivables or financial assets as the factor, show these arrangements at question 11h.

Question 10a is completed as follows in relation to your international related party dealings involving debt factoring arrangements:

• At label C, write the total amount of the book value of the debt factoring arrangements.
• At label D, write the total amount of consideration received for entering into the debt factoring arrangements.
  You need to show the total consideration at label D. Do not instead show at label D merely the net consideration or the difference between the total amount of the book value and total amount of consideration received.
• At label E, write the Appendix 5 code for the principal arm's length pricing method used in the debt factoring arrangements.
• At label F, write the Appendix 9 code for the percentage of your international related party dealings involving debt factoring arrangements for which you have documentation.

Percentage of dealings with documentation refers to the aggregate dollar amount of transactions reported at this question for which you have relevant documentation expressed as a percentage of total dollar value of transactions reported at this question.

Question 10b is completed as follows in relation to your international related party dealings involving securitisation arrangements:

• At label C, write the total amount of the book value of the securitisation arrangements.
• At label D, write the total amount of consideration received for entering into the securitisation arrangements.
  
  You need to show the total consideration at label D. Do not instead show at label D merely the net consideration or the difference between the total amount of the book value and total amount of consideration received.
• At label E, write the Appendix 5 code for the principal arm's length pricing method used in the securitisation arrangements.
• At label F, write the Appendix 9 code for the percentage of your international related party dealings involving securitisation arrangements for which you have documentation.

Percentage of dealings with documentation refers to the aggregate dollar amount of transactions reported at this question for which you have relevant documentation expressed as a percentage of total dollar value of transactions reported at this question.

Question 11 Dealings of a financial nature

This question collects information about your dealings of a financial nature with international related parties other than those covered in questions 9 and 10. Your dealings of a financial nature include:

• borrowings or loans
• foreign currency trade related financial liabilities or receivables resulting in assessable foreign exchange gains or deductible foreign exchange losses during 2022–23, for example    
  • foreign currency intercompany liabilities for amounts payable by you for purchase of commodities from international related parties which were satisfied during 2022–23
  • foreign currency intercompany receivables for amounts payable to you for provision of services to international related parties which were satisfied during 2022–23.
   
• any deferred foreign currency payment arrangements or other financial liabilities for which you have FX gains or losses which are reportable at question 11g.

Internal fund transfers to or from your own branch operations or any other financial dealings in connection with your own branch operations should not be shown at question 11 and should instead be shown at question 18 of the schedule. See, International related party dealings, do not include any 'dealings' with your own branch operations.

Loans and interest

Loan arrangement has its ordinary meaning within the context of commercial and accounting practices. In general terms, a loan arrangement is defined as a contract whereby the lender pays a sum of money in consideration of a promise by the borrower to repay the money at some time in the future (and this promise may or may not include the promise to repay interest on the money borrowed). Any amounts that are not a loan but which would be considered to be a debt interest for the purposes of Division 974 of the ITAA 1997 should be included here. This will include redeemable preference shares or promissory notes which satisfy the conditions for a debt interest under subsection 974-20 of the ITAA 1997.

Financial arrangements that are economically in substance a loan arrangement would be regarded as a loan for the purposes of this question, for example, securities arrangements where the collateral is cash, sale and buyback arrangements to be settled in cash, or repurchase agreements (repos) to be settled in cash.

Whether a financial arrangement economically constitutes a loan arrangement is a matter to be decided based on the facts and circumstances of each arrangement.

For arrangements that are economically in substance loans, for the purposes of completing this question, treat:

• the cash collateral or cash settlement amount as the loan amount
• any fees paid or received in respect of those arrangements as interest
• any gain made or loss incurred in respect of those arrangements as interest.

For more information about the concept of what constitutes a loan, see:

• TR 92/11 Income tax: application of the Division 13 transfer pricing provisions to loan arrangements and credit balances
• TR 2002/16 Income tax: the taxation consequences for taxpayers issuing certain stapled securities.

We recommend that you seek appropriate advice or guidance in light of the particular facts and circumstances of your case.

We expect interest to be the principal expense incurred and revenue earned in respect of your financial arrangements in the nature of loans, and this would be included at question 11c. However, any other expenses and losses or revenue and gains associated with these arrangements, such as borrowing costs should be included at question 11f.

Do not show at this question principal and principal repayment amounts.

To complete this part of the question:

• identify all your international related party dealings of a financial nature in the nature of loans
• divide those loan arrangements into    
  • interest bearing loans
  • interest free loans
   
• calculate the average balance of each of those loan arrangements by    
  • adding up the loan balance amount at the start of the year and the loan balance amounts at the end of each quarter
  • dividing the result by 5
   
• in respect of interest bearing loans, determine the amount of interest expenditure or interest revenue in respect of these loans.

If you had any financial arrangements in the nature of loans with international related parties during 2022–23, answer Yes at question 11 – label A, and complete the following.

If an amount to be written at this question is not relevant for any of your international related party financial arrangements in the nature of loans, leave that space blank.

For question 11a:

• At label I, write the average balance of interest bearing loans in relation to amounts borrowed from international related parties.
• At label K, write the average balance of interest free loans in relation to amounts borrowed from international related parties.

The dollar amounts or values asked for in this question are all based on your accounting records.

For question 11b:

• At label I, write the average balance of interest bearing loans in relation to amounts loaned to international related parties.
• At label K, write the average balance of interest free loans in relation to amounts loaned to international related parties.

The dollar amounts or values asked for in this question are all based on your accounting records.

For question 11c:

• At label C, write the total interest expenditure in respect of the interest bearing loans borrowed from international related parties.
  
  Do not show your gains or losses from trading in bonds or other financial assets or liabilities at question 11c. You should instead show your gains or losses from trading in bonds or other financial assets or liabilities at question 11h.
• At label D, write the total interest revenue in respect of the interest bearing loans to international related parties.
  
  Do not show your gains or losses from trading in bonds or other financial assets or liabilities at question 11c. You should instead show your gains or losses from trading in bonds or other financial assets or liabilities at question 11h.
• At label F, write the Appendix 9 code for the percentage of the international related party interest you have shown for which you have documentation. If you applied one of the simplified record-keeping options in PCG 2017/2 Simplified transfer pricing record-keeping options for the interest you have shown, write code 7 at label F.

The dollar amounts or values asked for in this question are all based on your accounting records.

Guarantees

The expenditure and revenue for guarantees include fees associated with a contract or arrangement under which a party agrees to perform an obligation or discharge a liability of another entity should that entity fail to do so.

Insurance and reinsurance

This part of question 11 asks you to provide details of your expenses incurred and revenue earned or derived in relation to your insurance and reinsurance contracts with international related parties during 2022–23.

Insurance is a means by which an entity can protect itself with an insurance company against the risk of loss. Insurance is commonly categorised into general insurance, life insurance and health insurance.

• expenditure incurred, or
• revenue earned or derived

for insurance services with international related parties, including activities associated with the management of insurance contracts (predominantly undertaken through intermediaries), should be shown at question 8c.

Reinsurance is a means by which an insurance company can protect itself with other insurance companies against the risk of losses. Therefore, the question relating to reinsurance is applicable only to insurance companies.

• expenditure incurred, or
• revenue earned or derived

for reinsurance services with international related parties, including activities associated with the management of reinsurance contracts (predominantly undertaken through intermediaries), should be shown at question 8d.

The amounts reported for this question should include the expenditure and revenue that would qualify as expenditure or revenue in relation to insurance or reinsurance contracts under relevant Australian accounting standards or comparable foreign accounting standards (for example, premium revenue, claim recoveries, commissions received from reinsurers). At the time of this publication, the 3 key Australian accounting standards relevant to the recognition of expenditure and revenue in relation to insurance or reinsurance include AASB 4 Insurance Contracts, AASB 1023 General Insurance Contracts and AASB 1038 Life Insurance Contracts. As the dollar amounts in this question are based on your accounting records, you should include all of your reinsurance expenditure and revenue in terms of section 148(1) of the ITAA 1936.

If you engaged an intermediary (for example, a broker) in arranging your insurance or reinsurance contracts, even if the intermediary was acting as an independent agent, the intermediary is considered to be acting on your behalf. Therefore, the transactions undertaken by the intermediary on your behalf should be included in your answer to this question.

For each of your financial dealings with international related parties of a type covered by questions 11d Guarantees, 11e Insurance or 11f Reinsurance, complete the question for that financial dealing type as follows:

• At label C, write the total expenditure you incurred for the financial dealing type.
• At label D, write the total revenue you earned or derived for the financial dealing type.
• At label E, write the Appendix 5 code for the main pricing methodology you used to set or review consideration in respect of the financial dealing type.
• At label F, write the Appendix 9 code for the percentage of your international related party dealings involving the financial dealing type for which you have documentation.

The dollar amounts or values asked for in this question are all based on your accounting records.

Percentage of dealings with documentation refers to the aggregate dollar amount of transactions reported at this question for which you have relevant documentation expressed as a percentage of total dollar value of transactions reported at this question.

Foreign exchange gains and foreign exchange losses

Question 11g asks you to provide details of foreign exchange gains you have returned and foreign exchange losses you have deducted for Australian income tax purposes in relation to dealings with international related parties.

This includes foreign exchange gains you have returned and foreign exchange losses you have deducted during 2022–23 for trade related financial liabilities or receivables, for example:

• foreign currency intercompany liabilities for amounts payable by you for purchase of commodities from international related parties which were satisfied during 2022–23
• foreign currency intercompany receivables for amounts payable to you for provision of services to international related parties which were satisfied during 2022–23.

If you have foreign exchange gains or foreign exchange losses from foreign currency deferred payment arrangements for certain kinds of transactions on revenue account covered by the special local file reporting rules for foreign current deferred payment arrangements, you can chose to rely on those rules for the purposes of completing question 11g. These rules mean you do not need to show the amount of foreign exchange gains or foreign exchange losses from short term foreign currency deferred payment arrangements meeting the requirements in the rules. As a practical matter these special rules are expected to only affect amounts you would otherwise have shown for the following transaction types in Appendix 12:

• Code 3 – IRP trade related liabilities
• Code 4 – IRP trade related receivables.

If these special local file reporting rules for foreign current deferred payment arrangements apply to you, and you choose to use them, the below instructions for question 11g should be treated as modified for amounts you would otherwise have shown for the relevant transactions. This means you may not need to include, in the amounts you show at question 11g, foreign exchange gains or foreign exchange losses from qualifying short term foreign currency deferred payment arrangements.

If you are an entity covered by the taxation of financial arrangements provisions (TOFA) in Division 230 of the ITAA 1997, your assessable foreign exchange gains and deductible foreign exchange losses for financial arrangements covered by TOFA are determined under Division 230 and Subdivision 775-F of the ITAA 1997, as applicable. For more guidance on entities covered by TOFA and the operation of TOFA, refer to the instructions for Question 20 and Guide to the taxation of financial arrangements (TOFA).

In other scenarios assessable foreign exchange gains and deductible foreign exchange losses are determined under the provisions in Subdivisions 775-B to 775-E and Subdivisions 960-C and 960-D of the ITAA 1997.

Foreign exchange gain refers to a foreign exchange gain attributable to fluctuations in a currency exchange rate you make as a result of a forex realisation event under the provisions.

Foreign exchange loss refers to a foreign exchange loss attributable to fluctuations in a currency exchange rate you make as a result of a forex realisation event under the provisions.

Under Subdivision 775-B of the ITAA 1997 there are 5 main types of forex realisation events:

1. Forex realisation event 1 happens if you dispose of foreign currency, or a right to receive foreign currency, to another entity.
2. Forex realisation event 2 happens if you cease to have a right to receive foreign currency (other than because you disposed of the right to another entity).
3. Forex realisation event 3 happens if you cease to have an obligation to receive foreign currency.
4. Forex realisation event 4 happens if you cease to have an obligation to pay foreign currency.
5. Forex realisation event 5 happens if you cease to have a right to pay foreign currency.

There are also special rules:

• under Subdivision 775-C of the ITAA 1997, for rollover for facility agreements and special rules for securities issued under the facility agreements
• under Subdivision 775-D of the ITAA 1997, providing an election to disregard forex realisation events 2 and 4 for qualifying forex accounts not exceeding $250,000
• under Subdivision 775-E of the ITAA 1997, providing a choice to use the retranslation method for qualifying forex accounts instead of forex realisation events 2 and 4

For more information about foreign exchange gains and losses, see Foreign exchange gains and losses.

To complete this question:

• identify all foreign exchange gains you have returned and foreign exchange losses you have deducted in relation to dealings with international related parties
• total the dollar value of foreign exchange gains you have returned and foreign exchange losses you have deducted for each Appendix 12 transaction type
• determine the 3 Appendix 12 transaction types for which you have the highest total dollar value of foreign exchange gains returned and foreign exchange losses deducted in relation to dealings with international related parties
• in respect of the 3 transaction types for which you have the highest dollar value of foreign exchange gains returned and foreign exchange losses deducted in relation to dealings with international related parties, then group the foreign exchange gains returned and foreign exchange loss deducted in each of the transaction types according to the Appendix 13 currency codes
• total the dollar value of foreign exchange gains you have returned and foreign exchange losses you have deducted for each currency code
• determine the 3 Appendix 13 currencies with the highest total dollar value of foreign exchange gains returned and foreign exchange losses deducted for each of the top 3 transaction types
• total the dollar value of foreign exchange gains you have returned in relation to dealings with international related parties for all other currencies that are not included at Appendix 13 currency codes
• total the dollar value of foreign exchange losses you have deducted in relation to dealings with international related parties for all other currencies, if any, not included at Appendix 13 currency codes.

At labels B, H and N, write the Appendix 12 codes for the 3 transaction types with the highest dollar value of foreign exchange gains returned and foreign exchange losses deducted in relation to dealings with international related parties. Write these codes in descending order of total dollar value.

At labels C, I and O, write the Appendix 13 currency codes for the 3 currencies for which you have the highest dollar value of foreign exchange gains returned and foreign exchange losses deducted in relation to dealings with international related parties for each of the top 3 transaction types you have identified. Write these codes in descending order of total dollar value.

At labels D, J and P, write the total amount of foreign exchange losses deducted in respect of each of the top 3 Appendix 13 currencies you have identified in relation to each of the top 3 transaction types identified.

At labels E, K and Q, write the total amount of foreign exchange gains returned in respect of each of the top 3 Appendix 13 currencies you have identified in relation to each of the top 3 transaction types identified.

At labels F, L and R, write the total of foreign exchange losses deducted in respect of all other currencies not included in Appendix 13 currency codes for each of the top 3 transaction types identified.

At labels G, M and S, write the total of foreign exchange gains returned in respect of all other currencies that are not included in Appendix 13 currency codes for each of the top 3 transaction types identified.

All amounts shown at this question are in Australian dollars.

Other financial dealings

Question 11h asks you to provide details of your expenses and losses incurred or revenue and gains earned in relation to your other kinds of financial dealings with international related parties during 2022–23. At question 11h report only amounts for financial dealings of a kind that are not covered by at questions 9, 10, 11a, 11b, 11c, 11d, 11e and 11g.

Do not show at question 11h dividends or other distributions of profit on ordinary shares or equity interests of a non-revenue nature.

Where the related party dealings involve financial assets, which are not trading stock, acquired for the purpose of disposal and held on revenue account for income tax purposes, you should show at question 11h the net profit or loss. Do not show the gross proceeds of disposal or gross acquisition costs.

Other financial dealings are 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 be treated as a derivative for the purpose of completing question 9. At the time of this publication, the 2 key Australian accounting standards relevant to this question include AASB 132 Financial Instruments: Presentation and AASB 139 Financial Instruments: Recognition and Measurement. You do not need to take into account the debt and equity provisions in Division 974 of the ITAA 1997.

The amounts reported at this question may be reported in the financial statements as revenue and gains or expenses and losses, depending on the accounting treatment of your relevant financial assets and financial liabilities. This includes amounts relating to hedging questions that are classified in the financial statements as financial assets or financial liabilities. Therefore for the purposes of this question, the terms:

• expenditure and losses are interchangeable
• revenue and gains are interchangeable.

For each of your financial dealings of any other kind with international related parties, complete question 11h as follows:

• At label C, write the total expenditure you incurred for the other kinds of financial dealings.
• At label D, write the total revenue you earned or derived for the other kinds of financial dealings.
• At label E, write the Appendix 5 code for the main pricing methodology you used to set or review consideration in respect of the other kinds of financial dealings.
• At label F, write the Appendix 9 code for the percentage of your international related party dealings involving the other kinds of financial dealings for which you have documentation. The dollar amounts or values asked for in this question are all based on your accounting records.
• At label H, write a description of the other kinds of financial dealings. The description should be limited to 200 characters.

Percentage of dealings with documentation refers to the aggregate dollar amount of transactions reported at this question for which you have relevant documentation expressed as a percentage of total dollar value of transactions reported at this question.

Question 12 Other dealings of a revenue nature

This question asks whether you had international related party dealings of a revenue nature, apart from the dealings covered in questions 5 to 11.

Do not show at question 12 any dividends or other distributions of profit on ordinary shares or equity interests of a non-revenue nature.

The dollar amounts or values asked for in this question are all based on your accounting records.

We expect the majority of international related party dealings entered into by taxpayers to come within the types of dealings covered by questions 5 to 11.

An international related party dealing of a revenue nature that you included at questions 5 to 11 should not be included at this question regardless of whether it was reported at questions 5 to 11 using tax or accounting figures.

Amounts included in your answers to questions 2 to 4 may be included again at questions 5 to 11.

If you had international related party dealings of a revenue nature, apart from the dealings covered in questions 5 to 11 answer Yes at question 12 – label A and complete the following:

• At label C, write the total amount of expenditure incurred with respect to these other kinds of international related party dealings of a revenue nature.
  
  Do not show at question 12 – label C any dividends or other distributions of profit paid on ordinary shares or equity interests of a non-revenue nature.
  
  Where the related party dealings involve assets, which are not trading stock, acquired for the purpose of disposal and held on revenue account for income tax purposes, you should show at question 12 the net profit or loss. Do not show the gross proceeds of disposal or gross acquisition costs.
• At label D, write the total amount of revenue earned or derived in respect of these other kinds of international related party dealings of a revenue nature.
  
  Do not show at question 12 – label D any dividends or other distributions of profit received on ordinary shares or equity interests of a non-revenue nature.
• At label E, write the Appendix 5 code for the principal arm's length pricing method used to set or review the consideration for these other kinds of international related party dealings of a revenue nature.
• At label F, write the Appendix 9 code for the percentage of these other kinds of international related party dealings of a revenue nature for which you have documentation.
• At label H, write a description of the principal activity undertaken in these other kinds of international related party dealings of a revenue nature. You should limit your description to 200 characters.

Percentage of dealings with documentation refers to the aggregate dollar amount of transactions reported at this question for which you have relevant documentation expressed as a percentage of total dollar value of transactions reported at this question.

Question 13 Tangible/intangible property of a capital nature

This question asks whether you had international related party dealings of a non-revenue (capital) nature, apart from the dealings covered by questions 5 to 11.

The dollar amounts or values asked for in this question are all based on your accounting records.

We expect the majority of international related party dealings entered into by taxpayers to come within the types of dealings covered by questions 5 to 11.

An international related party dealing that you included at questions 5 to 11 should not be included at this question, regardless of whether it was reported using tax or accounting figures.

Capital or revenue in nature

Whether dealings are capital or revenue in nature is a matter to be decided based on the facts and circumstances of each case. The leading Australian case on this topic is Sun Newspapers Ltd and Associated Newspapers Ltd v. FC of T (1938) 61 CLR 337; 5 ATD 87.

This case established that expenditure incurred in establishing, replacing and enlarging the profit yielding structure (the business entity and structure) is of a capital nature and should be contrasted with working or operating expenses incurred to operate the business or profit yielding structure. The test laid down in the Sun newspapers case requires the following 3 factors to be considered and weighed in deciding whether expenditure is capital or of a capital nature:

• The nature of the benefit or advantage obtained or secured by the incurrence of the expenditure, for example, whether the expenditure secures an enduring benefit.
• The manner in which the benefit or advantage so obtained or secured is to be relied upon or enjoyed.
• The means adopted to obtain or secure the benefit or advantage.

There are many other decisions of the Australian courts applying these principles in Sun Newspapers to various cases. For more information, see ATO guidance such as taxation rulings. We strongly recommend that you obtain appropriate guidance or professional advice in relation to the particular facts and circumstances of your case.

If you had international related party dealings of a non-revenue (capital) nature, apart from the dealings covered in questions 5 to 11, answer Yes at question 13 – label A and complete the following information at questions:

• 13a Disposal or acquisition of tangible property
• 13b Assignment of intellectual property
• 13c Assignment of shares or other equity interests
• 13d Assignment of loans or debts (not liabilities)
• 13e Other disposal or acquisition of intangible property
• 13f Cost plus remuneration for R&D type services

Otherwise answer No at question 13 – label A and go to question 13f.

13a Disposal or acquisition of tangible property

Tangible property includes plant and equipment.

Question 13a is completed as follows in relation to your international related party dealings of a non-revenue (capital) nature involving disposal or acquisition of tangible property:

• At label C, write the total consideration paid in respect of these international related party dealings of a non-revenue (capital) nature involving disposal or acquisition of tangible property.
• At label D, write the total amount of consideration received in respect of these international related party dealings of a non-revenue (capital) nature involving disposal or acquisition of tangible property.
• At label G, write the Appendix 10 code for the principal method you used for pricing these acquisitions or disposals involving disposal or acquisition of tangible property.
• At label F, write the Appendix 9 code for the percentage of your international related party dealings of a non-revenue (capital) nature involving disposal or acquisition of tangible property for which you have documentation.

Percentage of dealings with documentation refers to the aggregate dollar amount of transactions reported at this question for which you have relevant documentation expressed as a percentage of total dollar value of transactions reported at this question.

13b Assignment of intellectual property

Assignment includes assignment in law or in equity, including assignment by declaration of trust.

Intellectual property includes:

• trademarks
• patents
• registered designs
• copyright
• other intellectual property or similar property or rights including rights granted or protected under foreign law
• interests in or rights granted in respect of any of the above, for example, a license to use a copyright.

Question 13b is completed as follows in relation to your international related party dealings of a non-revenue (capital) nature involving assignment of intellectual property:

• At label C, write the total consideration paid in respect of these international related party dealings of a non-revenue (capital) nature involving assignment of intellectual property.
• At label D, write the total amount of consideration received in respect of these international related party dealings of a non-revenue (capital) nature involving assignment of intellectual property.
• At label G, write the Appendix 10 code for the principal method you used for pricing these international related party dealings involving assignment of intellectual property.
• At label F, write the Appendix 9 code for the percentage of your international related party dealings of a non-revenue (capital) nature involving assignment of intellectual property for which you have documentation.

Percentage of dealings with documentation refers to the aggregate dollar amount of transactions reported at this question for which you have relevant documentation expressed as a percentage of total dollar value of transactions reported at this question.

13c Assignment of shares or other equity interests

Assignment includes assignment in law or in equity, including assignment by declaration of trust.

Equity interests include an equity interest under Division 974 and section 820-930 of the ITAA 1997. For more guidance on what is an equity interest under Division 974, see Guide to the debt and equity tests.

Question 13c is completed as follows in relation to your international related party dealings of a non-revenue (capital) nature involving assignment of shares or other equity interests:

• At label C, write the total consideration paid in respect of these international related party dealings of a non-revenue (capital) nature involving assignment of shares or other equity interests.
• At label D, write the total amount of consideration received in respect of these international related party dealings of a non-revenue (capital) nature involving assignment of shares or other equity interests.
• At label G, write the Appendix 10 code for the principal method you used for pricing these international related party dealings involving assignment of shares or other equity interests.
• At label F, write the Appendix 9 code for the percentage of your international related party dealings of a non-revenue (capital) nature involving assignment of shares or other equity interests for which you have documentation.

Percentage of dealings with documentation refers to the aggregate dollar amount of transactions reported at this question for which you have relevant documentation expressed as a percentage of total dollar value of transactions reported at this question.

13d Assignment of loans or debts (not liabilities)

Assignment includes assignment in law or in equity, including assignment by declaration of trust.

Loans or debts (not liabilities) include debt receivables and loan receivables.

Question 13d is completed as follows in relation to your international related party dealings of a non-revenue (capital) nature involving assignment of loans or debts (not liabilities):

• At label C, write the total consideration paid in respect of these international related party dealings of a non-revenue (capital) nature involving assignment of loans or debts (not liabilities).
• At label D, write the total amount of consideration received in respect of these international related party dealings of a non-revenue (capital) nature involving assignment of loans or debts (not liabilities).
• At label G, write the Appendix 10 code for the principal method you used for pricing these international related party dealings involving assignment of loans or debts (not liabilities).
• At label F, write the Appendix 9 code for the percentage of your international related party dealings of a non-revenue (capital) nature involving assignment of loans or debts (not liabilities) for which you have documentation.

Percentage of dealings with documentation refers to the aggregate dollar amount of transactions reported at this question for which you have relevant documentation expressed as a percentage of total dollar value of transactions reported at this question.

13e Other disposal or acquisition of intangible property

Other disposal or acquisition of intangible property includes the issue of new shares or other equity interests.

The issue of equity interests include the issue of an interest which is an equity interest under Division 974 and section 820-930 of the ITAA 1997. For more guidance on what is an equity interest under Division 974, see Guide to the debt and equity tests.

Question 13e is completed as follows in relation to your international related party dealings of a non-revenue (capital) nature involving other disposal or acquisition of intangible property:

• At label C, write the total consideration paid in respect of these international related party dealings of a non-revenue (capital) nature involving other disposal or acquisition of intangible property.
• At label D, write the total amount of consideration received in respect of these international related party dealings of a non-revenue (capital) nature involving other disposal or acquisition of intangible property.
• At label G, write the Appendix 10 code for the principal method you used for pricing these international related party dealings involving other disposal or acquisition of intangible property.
• At label F, write the Appendix 9 code for the percentage of your international related party dealings of a non-revenue (capital) nature involving other disposal or acquisition of intangible property for which you have documentation.

Percentage of dealings with documentation refers to the aggregate dollar amount of transactions reported at this question for which you have relevant documentation expressed as a percentage of total dollar value of transactions reported at this question.

13f Cost plus remuneration for R&D type services

This question aims to identify whether you have performed research and development (R&D) type activities for the benefit of a related party in another country where you received or were entitled to receive remuneration for performing these activities at an amount based on the costs of these activities plus an agreed margin (cost plus basis). This includes expenses qualifying for the R&D tax incentive and all other R&D expenses which do not qualify for the R&D incentive.

If you have performed R&D for the benefit of a related party in another country where you have been remunerated on a cost plus basis, answer Yes at question 13f – label A.

If you answer Yes, you must specify the amount of your relevant R&D costs at question 13f – label C, and the amount of the cost plus margin received at question 13f – label D.

For information, see Research and development tax incentive.

For more information on transfer pricing and the cost plus method, see Chapter 3 of TR 97/20 Income tax: arm's length transfer pricing methodologies for international dealings.

Question 14 No payment or non-monetary payment

This question asks whether you have had any international related party dealings involving no payment or a non-monetary payment (as defined below). Information regarding the nature of these dealings and where they occurred will further assist us in identifying if there has been international related party dealings that give rise to a:

• transfer pricing risk (but would not be reported at other questions in the schedule due to the nature of the consideration being nil or non-monetary)
• a capital gains tax risk.

See the instructions to question 13 for guidance on whether dealings are capital or revenue in nature.

If you had any international related party dealings involving no payment or a non-monetary payment, answer Yes at question 14 – label A and complete the following:

• 14a No payment
• 14b Non-monetary payment

14a No payment

Where there has been no charge or other consideration payable for the provision of services, transfer of property or other benefit provided under an international related party dealing, then this would be taken to be a dealing involving no payment.

You are not required to report at this question any interest free loans disclosed at question 11.

You are not required to report transactions where you have received a benefit for no payment.

You must report transactions where you have provided a benefit for no payment.

Question 14a is completed as follows in relation to your international related party dealings involving no payment:

• At label B (in the column headed Capital), write the Appendix 2 country code to indicate the location of the related party for your international related party dealings of a non-revenue (capital) nature involving no payment. If you have had more than one particular type of international related party dealings of a non-revenue (capital) nature involving no payment, use the Appendix 2 country code for such type of dealings with the highest dollar value.
• At label C (in the column headed Capital), write the Appendix 7 code to indicate the nature of the item subject of your international related party dealings of a non-revenue (capital) nature involving no payment. If you have had more than one particular type of international related party dealings of a non-revenue (capital) nature involving no payment, use the Appendix 7 code for the nature of the item for such type of dealings with the highest dollar value.
• At label D (in the column headed Revenue), write the Appendix 2 country code to indicate the location of the related party for your international related party dealings of a revenue (non-capital) nature involving no payment. If you have had more than one particular type of international related party dealings of a revenue (non-capital) nature involving no payment, use the Appendix 2 country code for such type of dealings with the highest dollar value.
• At label E (in the column headed Revenue), write the Appendix 7 code to indicate the nature of the item subject of your international related party dealings of a revenue (non-capital) nature involving no payment. If you have had more than one particular type of international related party dealings of a revenue (non-capital) nature involving no payment, use the Appendix 7 code for the nature of the item for such type of dealings with the highest dollar value.

14b Non-monetary payment

A dealing involving a non-monetary payment may be a barter, swap, bonus or discount, or any type of similar arrangement.

A non-monetary payment will generally include consideration that is not one of the following:

• monetary payment
• payment by cheque
• telegraphic and bank-to-bank transfer of funds.

Debt-for-equity swaps will be taken to be a non-monetary payment.

Question 14b is completed as follows in relation to your international related party dealings involving a non-monetary payment:

• At label B (in the column headed Capital), write the Appendix 2 country code to indicate the location of the related party for your international related party dealings of a non-revenue (capital) nature involving a non-monetary payment. If you have had more than one particular type of international related party dealings of a non-revenue (capital) nature involving a non-monetary payment, use the Appendix 2 country code for such type of dealings with the highest dollar value.
• At label C (in the column headed Capital), write the Appendix 7 code to indicate the nature of the item subject of your international related party dealings of a non-revenue (capital) nature involving a non-monetary payment. If you have had more than one particular type of international related party dealings of a non-revenue (capital) nature involving a non-monetary payment, use the Appendix 7 code for the nature of the item for such type of dealings with the highest dollar value.
• At label D (in the column headed Revenue), write the Appendix 2 country code to indicate the location of the related party for your international related party dealings of a revenue (non-capital) nature involving a non-monetary payment. If you have had more than one particular type of international related party dealings of a revenue (non-capital) nature involving a non-monetary payment, use the Appendix 2 country code for such type of dealings with the highest dollar value.
• At label E (in the column headed Revenue), write the Appendix 7 code to indicate the nature of the item subject of your international related party dealings of a revenue (non-capital) nature involving a non-monetary payment. If you have had more than one particular type of international related party dealings of a revenue (non-capital) nature involving a non-monetary payment, use the Appendix 7 code for the nature of the item for such type of dealings with the highest dollar value.

 

 

Question 15 Share-based employee remuneration

This question seeks information to assess the specific transfer pricing risk of Australian taxpayers receiving or paying incorrect or no recharge amounts for providing or receiving employee share-based remuneration to employees of non-resident subsidiaries. We want to ascertain the level of recharge amounts being received or paid by Australian taxpayers and the pricing methodology used in respect of these amounts.

The dollar amounts or values asked for in this question are all based on your income tax records.

Under employee shared-based remuneration plans, a multinational group may remunerate employees by providing phantom shares in the listed parent company of the group, shares, share options or share rights.

Recharge amount is the compensation you received or paid in return for providing the employees with share-based remuneration. The recharge amount does not include any compensation received or paid in relation to the costs of administering an employee share-based plan since this would be compensation for services that you would report at question 8b.

Employees are individuals who provide personal services or labour to an entity and would be regarded as employees of that entity for legal or tax purposes. For example, employees would include the directors of a non-resident subsidiary.

Where an employee holds a position of employment in both an Australian taxpayer and a non-resident subsidiary of the taxpayer, consideration should be given to the 'capacity' in which the share-based remuneration is received. For example, where an individual is an employee of the Australian taxpayer and a director of a non-resident subsidiary, any share-based remuneration paid by the Australian taxpayer to the individual in their capacity as a director of the non-resident subsidiary would be included at this question. This accords with the approach taken in Article 16 of the OECD Model Tax Convention regarding the allocation of taxing rights (which provides that payments received by a resident of a contracting state in their capacity as a director of a company resident in the other contracting state may be taxed in that other state).

For more information about share-based remuneration plans for employees of non-resident subsidiaries, including application of the arm's length principle to arrive at an appropriate recharge amount, see OECD Tax Policy Studies No. 11 (2005) – The Taxation of Employee Stock Options (particularly Chapter 4 – Impact on Transfer Pricing). You can buy this at OECD iLibraryExternal Link.

To complete this question:

• identify the share-based employee remuneration provided to or received from international related parties
• determine whether there is a recharge amount paid or received in relation to the share-based remuneration provided to your employees
• determine the total amount of the recharge amounts paid by you during 2022–23
• determine the total amount of the recharge amounts received by you during 2022–23.

If you did provide (or receive) share-based remuneration to any employees of an international related party during 2022–23, answer Yes at question 15 – label A and complete the following:

• At label C, write the total recharge amounts you claimed as deductions for 2022–23.
• At label D, write the total recharge amounts you included in your assessable income for 2022–23.

Question 16 Cost contribution arrangement

This question seeks information to understand whether there was a cost contribution arrangement for developing, producing or obtaining assets or rights with an international related party.

For more detail on cost contribution arrangements TR 2004/1 Income tax: international transfer pricing – cost contribution arrangements – paragraph 14. You should not include any cost contribution arrangements which are pure service arrangements, as described in TR 2004/1.

If you had a cost contribution arrangement for developing, producing or obtaining assets or rights with any international related parties, answer Yes at question 16 – label A.

Question 17 Restructuring events

This question seeks to identify significant restructures undertaken between Australian taxpayers and international related parties or your branch operations.

Disclosing a restructuring event at this question does not mean you do not still need to show specific international related party dealings at other questions. For example, if the restructuring event includes an acquisition, disposal or assignment of a capital nature during 2022–23 with an international related party, you will still need to show the consideration paid or consideration received for that acquisition, disposal or assignment at question 13.

For the purposes of this question we have adopted a wide meaning of restructuring which goes beyond the generally accepted financial definition.

Restructuring events for the purposes of this question, consistent with the definition in TR 2011/1 Income tax: application of transfer pricing provisions to business restructuring by multinational enterprises, are arrangements whereby assets, functions or risks of a business are transferred between you and international related parties, or your branch operations. This may include:

• reorganisation of your structure resulting in the disposal or acquisition of entities or the change in ownership of entities
• establishing, expanding, downsizing, liquidating or relocating business operations or business lines, resulting in    
  • the acquisition or the disposal of assets or liabilities (tangible or intangible)
  • the transfer of functions or the significant modification of service arrangements between yourself and international related parties (for example, this may include transfer of agency, distribution, finance, information technology, insurance, logistics, marketing, sales, shared services, shipping, trading, transport and treasury functions)
  • the transfer of risks between yourself and international related parties
  • the increase or decrease of rights or obligations
   
• where there has been a change in the nature of the business carried on through your branch operations, for example, you have commenced or ceased to use your property in your branch operations or you have commenced or ceased to perform functions or services through your branch operations.

There are compliance risks associated with restructures, particularly those involving international related parties. In order to analyse the compliance risks of these restructures we need to understand the nature of restructuring undertaken by Australian taxpayers with international related parties.

This question also collects information about restructures involving your branch operations. Aspects of these restructures may be reflected in internally recorded 'dealings' with your branch that record the attribution of your income and expenditure to the branch operations.

The dollar amounts or values asked for in this question are all based on your accounting records.

We recognise that this question asks you to determine a value for each restructure, even though there may not be payment of consideration in respect of some transactions forming part of the restructure. For these transactions we ask you to make a reasonable determination of the value. We do not expect you to obtain a formal valuation for this purpose.

For the purpose of this question the most material restructuring events aggregates 2 elements:

• The capital value of each restructure. This will be the value of the restructure shown at question 17a – label D and should be the aggregated value of the restructure in terms of acquiring or disposing of assets, liabilities, functions, risks, rights or obligations.
• The gross impact on transactions reflected in your income and expenditure for international related party dealings, including in the next 5 years, resulting from each restructure.

To complete this question:

• disregard all restructures where there is no international related party or branch operation involvement
• determine the 3 most material restructure events.

If during 2022–23 you had restructuring events involving international related parties or branch operations, answer Yes at question 17– label A and complete the required fields.

At question 17a:

• Identify the principal international related party involved in each of the 3 restructures. At label C, select branch B or entity E for the type of related party involved in the restructure.
• At label D, select the code at Appendix 11 which indicates the relevant capital value of the first restructure listed, then determine the aggregated value shown in your accounting records during 2022–23 for each remaining restructure event in terms of acquiring or disposing of assets, liabilities, functions, risks, rights or obligations.

You will still need to show any specific international related party dealings connected with the restructuring event at other relevant questions. For example, if the restructuring event includes an acquisition, disposal or assignment of a capital nature during 2022–23 with an international related party, you will still need to show the consideration paid or consideration received for that acquisition, disposal or assignment at question 13.

• At label E, write the Appendix 7 code that best describes the nature of the restructure in terms of the asset, liability, function, risk, right or obligation.
• At label G, specify the code of the country in which the principal international related party to the relevant restructure was located, or the foreign country relevant to your branch operations.
• At label F, identify the code for the percentage of dealings for which you have documentation.
  
  Percentage of dealings with documentation refers to the aggregate dollar amount of transactions reported at this question for which you have relevant documentation expressed as a percentage of total dollar value of transactions reported at this question.
• At label H, write a brief description of the main elements of the restructure; the description should include both the initial transfer of assets, liabilities, functions, risks, rights or obligations and the resulting change in international related party dealings, including in future years. In the example below, the description could be 'ceased New Zealand branch operations, dealing in derivative contracts continued with other world-wide associates'. The description should be limited to 3,000 characters.
• At label I, indicate if there was a contemporaneous, professional valuation study or transfer pricing analysis of the restructuring event undertaken. Transfer pricing analysis refers to transfer pricing documentation as discussed in Appendix 9.

At question 17b, answer Yes if you revalue any assets following the restructuring events involving international related parties or your branch operations.

Question 18 Branch operations

This question collects the amounts you have deducted or returned (for Australian tax purposes) for your internally recorded ‘dealings’ with your branch operations. This includes:

• if you are a non-resident, internally recorded ‘dealings’ with your Australian branch operations
• if you are a resident, internally recorded ‘dealings’ with or between your overseas branch operations.

The dollar amounts or values asked for in this question are all based on your accounting records.

These amounts record the attribution of your income and expenses or costs to your branch operations, where the income or expenses or costs were not wholly or directly earned from or incurred in your branch operations. For more information, see Permanent establishments (branch operations).

This question does not collect information about amounts you have deducted or returned for actual transactions between different related persons or entities connected with the branch operations of one of those persons or entities. Show your international related party dealings at questions 3 to 17 as applicable.

For example, do not show at this question, amounts for a contract or transaction between you and your Australian resident subsidiary in relation to the offshore branch operations of your subsidiary. Show these amounts as applicable in questions 3 to 17.

If you are an authorised deposit-taking institution (ADI) within the meaning of section 995-1 of the ITAA 1997 and are covered by TR 2005/11, include at questions 18a – label I and 18b – label I any funds, used in your Australian or offshore branch operations, that you have internally recorded as a 'loan' with your branch operations that records your attribution of your income or expenditure to the branch operations.

TR 2005/11 does not apply to Australian branch operations carried on by a foreign bank (or other qualifying financial entity) to which Part IIIB of the ITAA 1936 applies. The foreign bank (or qualifying financial entity) should instead complete question 40 of this schedule in relation to internally recorded inbound ‘loans’ to its Australian branch operations and any internally recorded derivative or foreign exchange covered by section 160ZZZE or section 160ZZZF (unless it has elected under section 160ZZVB of the ITAA 1936 that Part IIIB not apply).

For the avoidance of doubt, a foreign bank (or other qualifying financial entity) should include the 'Average balance' for 'Amounts loaned' at question 18b – label I, and the 'Interest' for 'Amounts loaned' at question 18b – label J for all internally recorded outbound ‘loans’ made in the course of its Australian branch operations. These labels are required to be completed for such internally recorded outbound ‘loans’ regardless of whether or not you have elected out of Part IIIB of the ITAA 1936.

If you are not an ADI covered by TR 2005/11, include at question 18c – labels I and J the amounts that you have internally recorded for the supply or acquisition of trading stock to or from your branch operations in accordance with paragraph 5.16 of TR 2001/11.

At question 18d – labels I and J, show any other amounts that you have deducted or returned (for Australian tax purposes) for your internally recorded ‘dealings’ with your branch operations, and at question 18d – label L write a description of the kind of expenditure or cost you have deducted, or income you have returned, for the internally recorded ‘dealings’ for which you included an amount at question 18d.

A foreign bank (or qualifying financial entity) with Australian branch operations to which Part IIIB of the ITAA 1936 applies should not show at question 18d – labels I and J any amounts taken to be paid under section 160ZZZE or section 160ZZZF. Amounts taken to be paid under section 160ZZZE or section 160ZZZF should only be shown at question 40b – labels G to J.

More than one amount and description can be included at question 18d – labels I, J and L (the methodology is described below).

If you have any branch operations, answer Yes at question 18 – label A and complete the required fields. Do not include your international related party dealings, which are instead disclosed at questions 3 to 17 as applicable.

At question 18a – label I, write the average balance of any internally recorded interest bearing loans from your branch operations.

At question 18b – label I, write the average balance of any internally recorded interest bearing loans to your branch operations (excluding amounts to which question 40 of this schedule applies).

At question 18a – label J, write the total interest calculated for the internally recorded loans from your branch operations shown at question 18a – label I.

At question 18b – label J, write the total interest calculated for the internally recorded loans to your branch operations shown at question 18b – label I.

At question 18a – label K, write the average balance of internally recorded interest free loans from your branch operations for the purpose of TR 2005/11.

At question 18b – label K, write the average balance of internally recorded interest free loans to your branch operations for the purpose of TR 2005/11.

At question 18c – label I, write the total purchase costs, claimed for Australian tax purposes, for internally recorded ‘trading stock transfers’ to or from your branch operations.

At question 18c – label J, write the total sales proceeds, for Australian tax purposes, from internally recorded ‘trading stock transfers’ to or from your branch operations.

At question 18d – label I, write the Total amounts claimed, being total costs or expenditure deducted, for Australian tax purposes, for all other internally recorded ‘dealings’ with your branch operations.

At question 18d – label J, write the Total amounts returned, being total income or other amounts returned, for Australian tax purposes, for all other internally recorded ‘dealings’ with your branch operations.

At question 18d – label L, write a description of what kind of expenditure or cost you have deducted, or income or other amounts you have returned, for the internally recorded ‘dealings’ with your branch operations which you included at question 18d – labels I or J.

At question 18d, if you have more than one type of other internally recorded ‘dealings’, show the requested total amounts and write a description of each type of 'dealing' separately. That is, for Total amounts claimed and Total amounts returned respectively write a description for each other type of internally recorded ‘dealing’ reflected in each of those amounts. If you are lodging a paper tax return, provide additional information as an attachment to the schedule.

Continue to: Section B: Financial arrangements