Australia: ATO issues draft ruling on reconstruction of transactions

Tax Insights ()
The Australian Taxation Office (ATO) has issued Draft Taxation Ruling TR 2014/D3 which outlines its preliminary views on the operation of the reconstruction provisions within the new Australian transfer pricing laws.  In certain circumstances, these provisions require taxpayers to disregard in whole, or in part, actual transactions entered into and replace them with hypothetical transactions for the purposes of applying the transfer pricing rules. As taxpayers must apply these provisions on a self -assessment basis, the ATO's draft guidance had been eagerly anticipated; however, the draft ruling has been drafted in broad and ambiguous terms and is likely to leave taxpayers facing uncertainty and an increased compliance burden.