Australia has had strict transfer pricing rules for decades, but tighter laws are now in place and the Australian Taxation Office (ATO) has an increasing focus on this area. Increased global and domestic scrutiny means it’s now critical for multinationals to have transfer pricing that is documented, justified and up-to-date.
Australia, together with other OECD member countries, bases its transfer pricing rules on the ‘arm’s length principle’. This principle requires that prices for goods and services sold to related international parties reflect what independent parties would pay for the same or similar good or service.
If a company’s results are found to be substantially different to other non-related companies in the same industry with similar operations, the tax authorities can adjust the company’s taxable income to bring it into line with the comparable ‘arm’s length’ results.
As well as satisfying the internationally accepted ‘arm’s-length-principle’, global businesses must document their cross-border transactions with related parties in line with the domestic tax rules in countries where they operate.
Australian transfer pricing rules
In Australia, entities which are part of international groups are obligated to keep records of their transfer pricing policies, called ‘Transfer Pricing Manuals’. Additionally, if transactions with international parties are over $2 million, they must disclose these in an International Dealings Schedule (IDS) as part of the company’s tax return.
Businesses with related party international dealings may have their transfer pricing reviewed or audited by the Australian Taxation Office at any time. Therefore, accurate preparation of your IDS and an up-to-date transfer pricing manual is critical to avoid unnecessary reviews or unfavourable audit outcomes. See our article on Australia’s transfer pricing requirements for more detail.
Does your company satisfy the ‘arm’s length’ test?
It’s challenging for companies to know whether they will satisfy the comparable arm’s length requirement test when they need information about competitors who are not required to publically lodge financial details. Accru has access to sophisticated databases of reliable financial information covering thousands of companies across different industries and regions to support our clients in this area.
How Accru assists with transfer pricing in Australia
Accru’s Sydney office, Accru Felsers, has been providing transfer pricing services for over 20 years. Our transfer pricing manuals provide a rationale for why a particular method of comparison was used and why a company’s pricing meets the arm’s length requirement, as well as providing the information required to satisfy the ATO.
Our transfer pricing specialists also have direct experience with ATO transfer pricing reviews and negotiating Advance Pricing Agreements (APAs) with successful outcomes. We can assist you to meet your transfer pricing obligations and ensure you are in a secure position to refute any claims put forward in the event of an ATO transfer pricing review.
In addition, our approach to transfer pricing can help to identify more cost-effective arrangements for your international transactions and use real commercial drivers in making pricing decisions.
Our transfer pricing services
Preparation & review of transfer pricing documentation
- Transfer pricing documentation monitoring and updating in accordance with the Australian regime, addressing the ATO’s requirement for a reasonably arguable position (RAP)
- International Dealings Schedule (IDS) and disclosures
- Country by Country report, Master file and Australian local file with required disclosures for groups with AUS$1 billion turnover.
Transfer pricing structuring & strategies
- Designing, implementing and evaluating transfer pricing structures, methods and policies based on third-party databases
- Tax planning from a transfer pricing point of view at regional, national and international level
- Creation and annual updates of benchmark and database analyses.
Responding to Australian Taxation Office audits and dispute resolution
- ATO risk reviews, audit or litigation assistance including strategy advice, drafting letters and meetings, defending transfer pricing policies and documentation
- Obtaining an Advance Pricing Agreement (APA) with local (ATO) and overseas tax authorities
- Support in arbitration proceedings and in mutual agreement procedures (MAPs).
We also offer a full range of international taxation services.