These instructions will help you complete Schedule 25A 2011.
If you answered yes on your partnership, trust, company or fund tax return to a question that asked if the aggregate amount of your transactions or dealings with international related parties was more than $1 million, complete section A of Schedule 25A 2011 and lodge it with the appropriate tax return. The aggregate amount of the dealings is the total amount of all dealings, whether on revenue or capital account, and includes the balance of any loans or borrowings outstanding with international related parties.
If you answered yes on your partnership, trust, company or fund tax return to a question about your overseas branch operations, an interest in a foreign company or a foreign trust, complete all questions in section B of Schedule 25A 2011 and lodge it with the appropriate tax return.
If you answered yes to both questions, complete sections A and B and lodge Schedule 25A 2011 with the appropriate tax return.
Answer the items in Schedule 25A 2011, including yes or no items, that apply to your particular circumstances. If an item or part of an item does not apply, leave it blank.
Please note: if you are a financial services provider you may need to complete the International dealings schedule - financial services 2011 instead of Schedule 25A 2011.
The International dealings schedule -- financial services 2011 must be completed by all entities who are:
- a foreign bank
- a foreign bank branch
- general or life insurance entity, or
- financial service providers (except superannuation funds) who reported an annual turnover of $250 million or more on their current year's income tax return.
For more information, refer to International dealings schedule - financial services instructions.
Related-party international dealings
Section A of Schedule 25A 2011 refers to related-party international dealings.
Complete section A if you answered yes to any of the following:
- item 23 of the Company tax return 2011 (NAT 0656)
- W item 29 of the Partnership tax return 2011 (NAT 0659)
- W item 29 of the Trust tax return 2011 (NAT 0660)
- B item 17 of the Fund income tax return 2011 (NAT 71287).
The ATO issues public rulings setting out its policies on taxation aspects of related-party international dealings. Those public rulings are:
- Taxation Ruling TR 94/14 - Income tax: application of Division 13 of Part III (international profit shifting) - some basic concepts underlying the operation of Division 13 and some circumstances in which section 136AD will be applied
- Taxation Ruling TR 97/20 - Income tax: arm's length transfer pricing methodologies for international dealings
- Taxation Ruling TR 98/11 - Income tax: documentation and practical issues associated with setting and reviewing transfer pricing in international dealings
- Taxation Ruling TR 1999/1 - Income tax: international transfer pricing for intra-group services
- Taxation Ruling TR 2004/1 - Income tax: international transfer pricing - cost contribution arrangements.
We recommend that taxpayers with related-party international dealings be familiar with these rulings. There are also a number of publications about international transfer pricing. Go to www.ato.gov.au and enter 'international transfer pricing' in the 'Search for' box at the top of the page.
Definitions of some terms used in Schedule 25A 2011 are in appendix 2.
Permanent establishments
Permanent establishment is defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). It includes:
- business operations carried on by an Australian resident entity at or through a fixed place of business in another country, and
- business operations carried on by a foreign resident entity at or through a fixed place of business in Australia.
For more information refer to Taxation Ruling TR 2002/5 Income tax: Permanent establishment - What is 'a place at or through which [a] person carries on any business' in the definition of permanent establishment in subsection 6(1) of the Income Tax Assessment Act 1936?
Although branch operations are not an 'entity' or 'party' separate from the taxpayer who undertakes those operations, determining the taxable profits of branch operations involves attributing income and expenditure of the taxpayer on a separate entity basis. In the case of income and expenditure of the taxpayer which is not wholly or directly earned from, or incurred in, its branch operations, income or expenses may be attributed to its branch operations on the basis of internally recorded 'dealings' on the proviso that those records reflect the functions and assets of the business operations carried on at or through the permanent establishment and represent the best estimate of branch profits that can be made in the circumstances. Refer to Taxation Ruling TR 2001/11 Income tax: international transfer pricing- operation of Australia's permanent establishment attribution rules and Taxation Ruling TR 2005/11 Income tax: branch funding for multinational banks for more information.
The information collected at items 1 and 2 of this schedule includes what you have internally recorded as dealings between you and your branch operations, or income/gains you have returned or the expenses/losses you have claimed in respect of those internally recorded dealings.
Examples
Examples, including suggested answers, for items 2 to 6 of Schedule 25A 2011 are provided at appendix 5.
Interests in foreign companies or foreign trusts
Section B of Schedule 25A 2011 refers to offshore branch operations of Australian companies, controlled foreign companies (CFCs) and controlled foreign trusts (CFTs), and must be completed in all cases where the answer is yes to any of the following:
- item 24 of the Company tax return 2011
- S item 22 of the Partnership tax return 2011
- S item 22 of the Trust tax return 2011
- C item 17 of the Fund income tax return 2011
If you need to complete section B, you must answer item 11 and items 13 to 17. Leave other items blank if they do not apply.