Transfer Pricing Documentation and the Simplified Transfer Pricing Documentation Rules

Transfer pricing continues to be a topical and challenging issue for taxpayers and revenue authorities in Australia and around the world.

The OECD’s base erosion and profit shifting (BEPS) project, and Australia’s implementation of many of its recommendations, highlight the importance of transfer pricing to the compliance and governance frameworks of affected taxpayers.

The Australian Taxation Office has released Practical Compliance Guideline PCG 2017/2 Simplified transfer pricing record keeping options in an attempt to help reduce the compliance burden on business.

Outlining transaction types or activities identified as ‘low risk’ for international related party dealings, this PCG specifies the criteria for taxpayers to self-assess their eligibility to use one or more of eight simplification options.

In September, The Tax Institute will stage the ‘Transfer Pricing Webinar Series’, off the back of our sold-out National Transfer Pricing Conference in Sydney earlier in the year.

The series kicks off with the session from Ashish Dave (Duff & Phelps) on ‘The Basics of Transfer Pricing Documentation’, followed by Lauren Whelan (HLB Mann Judd) on the ‘Simplified Transfer Pricing Documentation Rules’ in session two.

Ashlish and Lauren tell us more about the issues facing advisers in this post.

Ashlish told us “I’ll be covering the objectives of preparing transfer pricing documentation (TPD) - having regard to the legacy transfer pricing law in Division 13 and the new provisions (in Subdivision 815B), as well as the practical steps to be employed in preparing such documentation with an eye on penalty protection.”

Covering the history of TPD in Australia: Div 13 v Div 815-B and 815-C, Ashlish will provide an analysis of global group and local entity, and a review of related party dealings, including a market and industry overview. He will also look at the implications of holding TPD, including disclosure in tax returns and risk to ATO review and penalties. 

“Taxpayers sometimes tend to forget that the transfer pricing law under the new rules operate under a self-assessment basis. Meaning, the Public Officer has the responsibility to ensure that the taxable income is arm’s length from transfer pricing perspective and the documentation should be prepared on or before the time the income tax return is due for lodgment” he said.

“My session will help delegates understand the changing transfer pricing requirements in Australia and will seek to explain how best to establish and implement best practice transfer pricing systems for efficiency and to improve corporate governance and risk management for the attendees’ clients and /or business.”

In the second session in the series, Lauren Whelan looks at the Simplified Transfer Pricing Documentation Rules.

Lauren said “I’ll be covering the purpose and the history of the simplified transfer pricing record keeping options in Australia. Practical Compliance Guideline PCG 2017/2 explores eight simplification options, and I’ll be covering what these are as well as some proposed changes. I’ll discuss some of the practical issues in applying the eight options, and I’ll also be looking at how these rules interact with other countries transfer pricing rules.”

Lauren’s session also looks at the implications of applying the Simplified Transfer Pricing Documentation Rules – including disclosure in tax return and risk to ATO review and penalties.

“There are some blind spots in this area that advisers need to be aware of, from what constitutes an ‘Australian economic group’ and if and how reimbursements count towards the intra group services option. I’ll also be covering what it means to have assessed your compliance with the transfer pricing rules, and if you can apply these rules if you have started operating in the current financial year.”

“Ultimately I want delegates to leave this session with an understanding of how they can apply the eight simplified transfer pricing record keeping option to their clients and/or their business as a reasonably arguable position for an Australian taxpayer’s international related party dealings” she said.

Lauren joined HLB Mann Judd in 2012 and practices in tax compliance and consulting, specialising in tax issues facing multinationals. Lauren has extensive experience in corporate taxation, advising businesses (both publicly and privately owned) across a range of industries including property, freight forwarding and waste management. This year she was nominated as a finalist in the Young Leaders in Finance Awards.

Ashish Dave is a director in Duff & Phelps Transfer Pricing practice based in Sydney. Ashish has more than 15 years of experience in international tax, specializing in transfer pricing. As a transfer pricing specialist, he has advised a wide range of clients in preparing transfer pricing policies, designing transfer pricing systems, and documentation covering masterfile and local file. Ashish is a regular presenter at conferences and seminars.

The Transfer Pricing Webinar Series kicks off with Ashlish’s session on 18 September, followed by Lauren’s on 20 September. Find out more on our website.


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