Tax Laws Amendment (Countering Tax Avoidance and Multinational Profit Shifting) Act 2013 (101 of 2013)

Schedule 2   Modernisation of transfer pricing rules

Part 1   Main amendments

Taxation Administration Act 1953

7   At the end of Division 284 in Schedule 1

Add:

Subdivision 284-E - Special rules about unarguable positions for cross-border transfer pricing

Table of sections

284-250 Undocumented transfer pricing treatment not reasonably arguable

284-255 Documentation requirements

284-250 Undocumented transfer pricing treatment not reasonably arguable

This Division has effect in relation to an entity as if a matter was not *reasonably arguable if:

(a) the matter is a particular way of applying (including not applying) Subdivision 815-B or 815-C of the Income Tax Assessment Act 1997 to a matter (or identical matters); and

(b) the entity does not have records that meet the requirements in this Subdivision for the application of the Subdivision mentioned in paragraph (a) to that matter (or those matters) in that way.

Note: For the Commissioner's power to remit an administrative penalty imposed by this Part, see section 298-20.

284-255 Documentation requirements

(1) Records kept by an entity meet the requirements in this Subdivision for the application (or non-application) of Subdivision 815-B or 815-C of the Income Tax Assessment Act 1997 to a matter (or identical matters) in a particular way if the records:

(a) are prepared before the time by which the entity lodges its *income tax return for the income year relevant to the matter (or matters); and

(b) are in English, or readily accessible and convertible into English; and

(c) explain the particular way in which the Subdivision applies (or does not apply) to the matter (or matters); and

(d) explain why the application of the Subdivision to the matter (or matters) in that way best achieves the consistency mentioned in section 815-135 or 815-235 of that Act (as the case requires) (about guidance material).

(2) Without limiting subsection (1), the records must allow each of the following to be readily ascertained:

(a) the *arm's length conditions relevant to the matter (or matters);

(b) the particulars of the method used and comparable circumstances relevant to identifying those arm's length conditions;

(c) unless the records are for the non-application of the Subdivision to a matter (or matters) - the result that the application of the Subdivision in that particular way, as compared to the non-application of the Subdivision, has for the operation of this Act in relation to the entity;

(d) for Subdivision 815-B - the actual conditions relevant to the matter (or matters);

(e) for Subdivision 815-C:

(i) the actual profits mentioned in paragraph 815-220(1)(a) of that Act and the *arm's length profits, to the extent that they are relevant to the matter (or matters); and

(ii) the particulars of the activities and circumstances mentioned in subsection 815-225(1) of that Act, to the extent they are relevant to the matter (or matters).