New Australian Transfer Pricing Laws in effect - pose practical issues

Tax Insights ()

The new Australian transfer pricing laws have now been passed, nearly 18 months since first announced. The new rules will apply to income years beginning on or after 1 July 2013. The existing transfer pricing provisions will cease to have effect at the same time.

All multinationals with operations in Australia will be impacted by the new rules to some extent. Key practical issues for taxpayers to consider when the new rules come into effect include:

  • Identifying the work that will need to be done by the time of lodging the first tax return under the new rules in order to self assess whether the company has complied with the rules.
  • Taxpayers wishing to establish a reasonably arguable position (RAP) in order to be eligible for penalty reductions will need a clear plan to ensure that transfer pricing documentation in accordance with the new documentation requirements is completed by the time of lodging the tax return.

The ATO is planning to prepare new guidance addressing some of the practical issues arising from the new rules; however, this will require a significant amount of time and resources. We understand that priority will be given to preparing new guidance in respect of documentation and penalties.