Section C: Category C reportable tax positions

You need to disclose Category C reportable tax positions in this section.

You must disclose a Category C RTP if you answer yes to any of the questions covered by Category C. Note, we do not consider materiality thresholds for Category C disclosures. If you are in a Category C disclosure, you must disclose.

Unless otherwise specified, the questions refer to the arrangements or transactions taking place in the income year covered by the tax return that your RTP schedule accompanies.

RTP Category C is updated throughout the year. We recommend you use the electronic version of this document to ensure that you are reporting on the most up to date list of RTP Category C questions.

Category C questions that reference a taxpayer alert may ask you to disclose either:

• arrangements with particular characteristics
• arrangements described in the taxpayer alerts.

For Category C questions that describe an arrangement with particular characteristics and refer to a Taxpayer Alert for further guidance, you must disclose the arrangement even when either:

• your arrangement is not covered by the examples in the taxpayer alert
• the mischief described by the taxpayer alert is not present in your arrangement.

For Category C questions that ask about arrangements described in a taxpayer alert, you will need to interpret the question widely and make a disclosure regardless of whether:

• some features of your arrangement are different to the features described in the examples provided in the relevant taxpayer alert
• your arrangement does not contain all features of the arrangement(s) described in the taxpayer alert
• you do not view the arrangement to be aggressive, inappropriate, contrived artificial
• you do not consider a tax benefit arose from the arrangement
• there is an observable third party market or long standing practice for this arrangement.

Did you have any Category C RTPs for the 2018 –19 income year?

The RTP schedule will require you to confirm 'No' or 'Yes' in respect to the existence of a Category C disclosure(s).

If you select no, then you do not have any Category C RTPs that you must disclose. Go to Section D: Declaration and signature.

If you select yes, you have one or more Category C RTPs that you are disclosing on this schedule. Go to the next question.

How many Category C RTPs are you reporting?

Enter the total number of Category C RTPs you are reporting.

You will need to follow the instructions for answering individual Category C questions to ensure you make a complete disclosure.

RTP Category C is updated throughout the year. We recommend you use the electronic version of this document to ensure that you are reporting on the most up to date list of RTP Category C questions.

Using the PDF RTP schedule

If you are completing the PDF version, the indicated number of RTPs (fields) will appear based on the number you select here. Once you move off this item, the PDF will display the additional fields if you indicated you have more than one RTP. To make a complete disclosure, complete all the mandatory fields for each RTP reported.

RTP Category C

This field automatically assigns a number to each Category C RTP you disclose so that each disclosure can be referenced.

Have you discussed this position with the ATO?

The RTP schedule will require you to confirm if you have previously discussed the disclosure(s) with the ATO. Proceed to the next question no matter what answer you provide.

RTP Category C question and subcategory

Enter the number of the Category C question you are disclosing under in the RTP Category C question field. If there are subcategories to the question, enter the relevant subcategory in the RTP Category C subcategory field.

If your entity has multiple positions covered by a single question, the question will tell you how to disclose this. You may need to select the appropriate subcategory or make a disclosure for each position that you have.

When self-assessing your entity’s arrangement under practical compliance guidelines, you need to consider any arrangements you had in place at any time during the year. If there has been a change to the rating or if an arrangement ceased during the year, this should be included under the optional comments.

Question 1

Did your entity claim a deduction under section 25-90 of the Income Tax Assessment Act 1997 (ITAA 1997) (or subsection 230-15(3) of the ITAA 1997 if you are a TOFA taxpayer) that was incurred in earning income that is non-assessable and non-exempt under both section 23AH of the Income Tax Assessment Act (ITAA 1936) and section 768-5 of the ITAA 1997? Refer to Taxation Determination TD 2016/6 for further guidance.

Question 2

Did your entity fund a special dividend or a share buy-back through an equity raising event at a similar time, where the arrangement is a type of arrangement or variation of an arrangement described in Taxpayer Alert TA 2015/2?

Question 3

Has your entity entered into any arrangement(s) or variation of an arrangement described in Taxpayer Alert TA 2015/5 involving the use of offshore entities which source goods (procurement hubs)?

Question 4

Did your entity recognise (in the current or last four years) any internally generated intangible assets or revalue an intangible asset(s) for the purposes of your thin capitalisation calculations using an arrangement or variation of an arrangement described in Taxpayer Alert TA 2016/1?

Question 5

Question removed as the information is collected through other means.

Question 6

Has your entity entered into a related party foreign currency denominated finance transaction(s) with related party cross currency interest rate swaps using an arrangement(s) or variation of an arrangement described in Taxpayer Alert TA 2016/3?

Question 7

Has your entity entered into any arrangement(s) or variation of an arrangement described in Taxpayer Alert TA 2016/4 involving cross-border leasing of mobile assets where related legal entities are interposed between the foreign owner and Australian operator?

We have issued Draft Practical Compliance Guideline PCG 2019/D5, outlining how taxpayers can self-assess the compliance risk of the transfer pricing outcomes of these and other similar arrangements. Once this PCG is finalised, this question will be updated to seek disclosure of the outcome taxpayers have self-assessed using the PCG.

Question 8

If your entity is an Australian income tax consolidated group, does it have an offshore permanent establishment that has allocated expenses associated with an intra-Australian group transaction, where the circumstances of the arrangement(s) are the same or similar to those described in Taxpayer Alert TA 2016/7?

Question 9

If your entity has related party dealings involving either a marketing hub or non-core procurement hub arrangement(s), disclose the outcome you have self-assessed using the applicable schedule in the Practical Compliance Guidelines PCG 2017/1 for each hub arrangement your entity is involved in.

For offshore marketing hub arrangements:

• Subcategory 1: white zone
• Subcategory 2: green zone
• Subcategory 3: blue zone
• Subcategory 4: yellow zone
• Subcategory 5: amber zone
• Subcategory 6: red zone or have not applied Schedule 1.

For offshore non-core procurement hub arrangements:

• Subcategory 11: white zone
• Subcategory 12: green zone
• Subcategory 13: blue zone
• Subcategory 14: yellow zone
• Subcategory 15: amber zone
• Subcategory 16: red zone or have not applied Schedule 2.

Enter the relevant subcategory number in the RTP Category C subcategory field.

Question 10

Has your entity excluded from its thin capitalisation calculations of debt capital (in the current or four prior years) any value of a ‘debt interest’ that has been treated wholly or partly as equity under accounting standards? Refer to Taxpayer Alert TA 2016/9 for further guidance.

Question 11

Is your entity currently involved in a cross-border round robin financing arrangement(s) using an arrangement or variation of an arrangement, described in Taxpayer Alert TA 2016/10?

Question 12

In the current or four prior years, was your entity party to an arrangement separating an integrated trading business into parts that result in trading income, being re-characterised into more favourably taxed passive income? Refer to Taxpayer Alert TA 2017/1 for further guidance.

Question 13

Has your entity claimed the R&D tax incentive using an arrangement or variation of an arrangement described in the subcategories below?

• Subcategory 1: Taxpayer Alert TA 2017/2 (construction activities)
• Subcategory 2: Taxpayer Alert TA 2017/3 (any business activities)
• Subcategory 3: Taxpayer Alert TA 2017/4 (agricultural activities)
• Subcategory 4: Taxpayer Alert TA 2017/5 (software development activities)
• Subcategory 5: More than one of abovementioned Tax Alert subcategories apply

Enter the relevant subcategory number in the RTP Category C subcategory field.

Question 14

If your entity has a cross border related party debt funding arrangement(s), disclose the outcome you have self-assessed using Schedule 1 of the Practical Compliance Guideline PCG 2017/4.

• Subcategory 1: white zone
• Subcategory 2: green zone
• Subcategory 3: blue zone
• Subcategory 4: yellow zone
• Subcategory 5: amber zone
• Subcategory 6: red zone or if you have not applied schedule 1

Enter the relevant subcategory number in the RTP Category C subcategory field.

Question 15

Question removed as the information is collected through other means.

Question 16

If your entity is an Australian income tax consolidated or multiple entry consolidated (MEC) group, has it entered into any arrangement(s) where a joining entity has become a subsidiary member of the group and any of the following subcategories apply?

• Subcategory 1: the churning rule (in section 716-440 of the ITAA 1997) applies to deny certain cost setting rules
• Subcategory 2: the churning rule did not apply because your entity did not satisfy the test in paragraph 716-440(1) (f) as there was no change in the majority economic ownership of the joining entity within the 12-month period before the joining time.

Note: If the arrangement under which the entity joined the group commenced on or after 15 February 2018, then paragraph 716-440(1) (f) applies to the sum of the total participation interests held by the control entity and its associates in the joining entity.

Enter the relevant subcategory number in the RTP Category C subcategory field. Enter the number 1 if both subcategories apply where your entity has two separate positions.

Question 17

At any stage during the income year, did your entity have a cross border financing arrangement(s) with an international related party (including via back to back arrangements through third parties) where it claimed a tax deduction for interest or an amount in the nature of interest, and interest withholding tax was not remitted because a withholding tax liability isn't expected to arise within the next 18 months. Refer to Taxpayer Alert TA 2018/4 for further guidance.

Question 18

Did your entity claim a deduction under section 25-90 of the ITAA 1997 (or subsection 230-15(3) of the ITAA 1997 if you are a TOFA taxpayer) for costs in relation to debt interests incurred in deriving non-assessable non-exempt income under sections 23AI or 23AK of the ITAA 1936 or Subdivision 768-A of the ITAA 1997? Refer to Taxpayer Alert TA 2009/9 for further guidance.

Question 19

If your entity had reached a formal settlement agreement or a future compliance arrangement with us for the current income year, do any of the following subcategories apply to you?

• Subcategory 1: your entity breached one or more of the terms of the settlement deed or future compliance arrangement
• Subcategory 2: changes in the relevant and material facts as disclosed in the deed or arrangement have occurred

Enter the relevant subcategory number in the RTP Category C subcategory field. Enter the number 1 if both subcategories apply where your entity has two separate positions.

Question 20

Has your entity participated in any arrangement(s) using securities lending and derivative contracts where your entity, or another participant has received franking credits using and arrangement, or variation of an arrangement, described in Taxpayer Alert TA 2018/1?

Question 21

Are you aware of any unamended mistakes or omissions in any single tax return lodged by your entity within four years of the lodgment date of this RTP schedule where if all mistakes or omissions in that return are amended, it would give rise to either:

• more than $1.5 million in tax being payable (or would have been payable had it not been offset, for example by losses from prior years)
• more than $5 million in losses (including capital losses).

For the purposes of this calculation, only count mistakes and omissions that your entity hasn't previously notified to us.

Question 22

If your entity has restructured out of any arrangements(s) (in the current or previous income year) to which the hybrid mismatch rules applied or would have applied had the arrangement(s) remained in place, disclose the subcategory that describes your entity's current position:

• Subcategory 1: all of the restructured arrangements qualify as low risk under Draft Practical Compliance Guideline PCG 2018/7
• Subcategory 2: one or more of the restructured arrangements does not qualify as low risk under Draft Practical Compliance Guideline PCG 2018/7.

In considering whether the hybrid mismatch rules would apply, you must disregard dual inclusion income.

Enter the relevant subcategory number in the RTP Category C subcategory field.

Question 23

If your entity has one or more financial arrangements involving cross border related party derivative transactions, disclose the outcome you have self-assessed using Draft Schedule 2 of the Practical Compliance Guideline PCG 2017/4:

• Subcategory 1: white zone
• Subcategory 2: green zone
• Subcategory 3: blue zone
• Subcategory 4: yellow zone
• Subcategory 5: amber zone
• Subcategory 6: red zone or if you have not applied Schedule 2.

Enter the relevant subcategory number in the RTP Category C subcategory field.

Question 24

If your entity has related party dealings involving inbound distribution arrangements enter the following number in the RTP subcategory field:

• Where we had previously reviewed your inbound distribution arrangements, enter 1.
• Where your entity has not self-assessed the risk zone of that arrangement using Practical Compliance Guideline PCG 2019/1, enter 3.
• Where your entity has self-assessed the risk zone of that arrangement using Practical Compliance Guideline PCG 2019/1, use the table below to disclose the schedule, the schedule category, and the risk zone of your entity's arrangements.

Table 1: Risk zone of an entity's arrangements

Category	Low risk	Medium risk	High risk
General distributor – Schedule 1 (not in an industry sector specifically covered by a separate schedule)	11	12	13
Category 1 Life science industry – Schedule 2	21	22	23
Category 2 Life science industry – Schedule 2	31	32	33
Category 3 Life science industry – Schedule 2	41	42	43
Category 1 ICT industry – Schedule 3	51	52	53
Category 2 ICT industry – Schedule 3	61	62	63
Motor vehicles industry – Schedule 4	71	72	73

Enter the relevant subcategory number in the RTP Category C subcategory field.

Question 25

This question needs to be considered by taxpayers for income years ending on or after 31 December 2019.

Has your entity entered into any arrangements or variation of an arrangement described in Taxpayer Alert TA 2018/2 under which your entity:

• claimed deductions for expenses incurred with offshore parties, and
• was granted access to intangible assets held by an offshore party, and
• did not treat any amount paid to offshore parties as a royalty in connection with this arrangement(s) for the purposes of determining PAYG withholding obligations under the Tax Administration Act 1953 or for any other relevant purpose under the Income Tax Assessment Act 1997 or Income Tax Assessment Act 1936?

Where your entity has multiple arrangements, you will need to disclose each arrangement separately, unless the criteria for treating similar arrangements or transactions as a single position apply. In this case, record the number of arrangements in the Optional comments field.

You are not required to make a disclosure where your entity entered into an international arrangement that involves an incidental use of an intangible asset. For example, an arrangement involving the resale of finished tangible goods where the activity of reselling the goods involves an incidental use of a brand name that appears on the goods and related packaging. Whether use is incidental in this sense will depend on an analysis of the true relationship and activities of the parties. The fact that an arrangement fails to expressly provide for the use of an intangible asset does not, in itself, determine that a use is incidental.

Question 26

This question needs to be considered by taxpayers for income years ending on or after 31 December 2019.

If your entity is a MEC group, has it entered into an arrangement(s) or variation of an arrangement described in Taxpayer Alert TA 2019/1, where a group CGT asset (with a large unrealised capital gain) is sold through an eligible tier-1 company (with significant intra-group debt), which is sold to a third party who undertakes to extinguish the intra-group debt?

Optional comments

You can disclose additional information relating to the individual Category C position in the Optional comments field.

While there is no requirement to complete this field, we would encourage you to briefly explain your arrangement. The benefits of doing so are:

• we may not need to contact you if the issue is not substantial, and
• we will have basic information about the position prior to contacting you, allowing us to prepare and tailor our communications to ask only relevant questions.

This schedule will allow you to type up to 3,000 characters (approximately 500 words) in this field. You also can attach additional information.

Using the PDF RTP schedule

If you are completing the PDF version, the Optional comments field will be displayed once you have indicated how many RTPs you are reporting. Once information has been entered, the field will expand when you click on or move onto another field. You will then be able to view all the text within a field.