Simplifying transfer pricing record keeping

Simplifying transfer pricing record keeping

We discussed Australia’s new transfer pricing regime in our December newsletter. The Australian Taxation Office has since released administrative guidance providing small businesses some relief from the complex and costly task of preparing transfer pricing documentation.

The entities that might qualify for simplified record keeping requirements:

  • Small businesses with a turnover of less than $25 million
  • Distributors with turnover of less than $50 million provided they have a profit before tax ratio of at least 3%
  • Entities with intra-group services of $1 million or less or representing less than 15% of total revenue or expenses of the Australian economic group
  • Entities with inbound loans with a balance of less than $50 million throughout the year

To qualify, entities must not have derived sustained losses (ie three consecutive years of losses), and must not have related party dealings with entities in “specified countries”.

There are other specific eligibility criteria outlined in on the ATO’s website.

The simplified record keeping options do not limit the operation of the law, and an appropriate arm’s length methodology must still be adopted to determine pricing. Where the simplified record keeping options are self-assessed, however, compliance action will not be taken to examine relevant transfer pricing records.  The assurance applies for three financial years commencing from 29 June 2013.

*Correct as of April 2015

*Disclaimer – this article has been produced by Kreston Stanley Williamson as a service to its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas contained in this article, it is imperative you seek specific advice relating to your particular circumstances. Liability limited by a scheme approved under professional standards legislation.

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