Australian mining tax – updated draft legislation tightens domestic transfer pricing rules

Tax Insights ()

The domestic debate on Australia’s proposed Minerals Resource Rent Tax (MRRT) has continued to rage since our last PKN advising on the release of the first Exposure Draft (ED) MRRT legislation (PKN dated 16 June 2011). In that PKN we highlighted the potential application of OECD transfer pricing methods to isolate an arm’s length ‘upstream’ value of the resource (which is taxed by the MRRT) from value associated with ‘downstream’ activities.

The second ED legislation and accompanying updated explanatory material were released on 18 September 2011. The release of the second ED is a further important step towards the implementation of the proposed MRRT legislation; currently scheduled to apply from 1 July 2012.