Explanatory Memorandum
(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Treaty-equivalent cross-border transfer pricing rules
1.150 This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .
Overview
1.151 This Bill inserts Subdivision 815-A into the ITAA 1997 to confirm that the internationally consistent transfer pricing rules contained in Australia's tax treaties and incorporated into Australia's domestic law provide assessment authority to address treaty related transfer pricing.
1.152 This Bill also ensures that the tax treaty transfer pricing rules are applied in a manner consistent with the relevant OECD guidance material.
1.153 This Bill applies for income years commencing on or after 1 July 2004.
Human rights implications
1.154 This Bill does not engage any of the applicable rights or freedoms.
1.155 This Bill ensures Parliament's view as to the way in which the transfer pricing rules in Australia's tax treaties operate is effective even though there are strong arguments for concluding that under the current income tax law these rules apply alternatively to Division 13. If this is the case, these amendments constitute a mere rewrite of those rules. To the extent that some deficiency exists in the current law, these amendments ensure the law can operate as the Parliament intended.
1.156 Although the Parliament has indicated the law applies in this way since at least 1982, the application date for this Bill of income years commencing on or after 1 July 2004 follows the most recent Parliamentary statement to this effect.
1.157 For income years commencing prior to 1 July 2012, to the extent administrative penalties are applicable as a result of adjustments made under Subdivision 815-A, the amount of the penalty under Subdivision 284-C of Schedule 1 to the TAA 1953 will be limited to amounts that would otherwise have applied had Subdivision 815-A not been enacted. This ensures for the retrospective years, commencing on or after 1 July 2004, that an entity will only be liable to administrative penalties in relation to the scheme benefit which could have been denied by another provision of the tax law had Subdivision 815-A not been enacted.
Conclusion
1.158 This Bill is compatible with human rights as it does not raise any human rights issues.