Transfer pricing and JobKeeper payments

December 2020

The Australian Tax Office has provided guidance on correctly managing the interaction between JobKeeper payments and a taxpayer's transfer pricing position.

The ATO indicates that it will be actively reviewing arrangements where the JobKeeper payment results in a change to an amount paid or received by the Australian entity or is shown to effectively shift the benefit of the government assistance to offshore related parties.

A relatively simple example outlining the ATO's concerns involves an assumed arm's length arrangement where an Australian subsidiary of a multinational group provides services to its offshore related party. The subsidiary charges the full cost of providing the services plus a profit mark-up of 10% under the arrangement.

The ATO indicates in these circumstances that JobKeeper payments received should not result in a reduction of the price of the service provided to the offshore related party (i.e. artificially reducing the subsidiary's income).

For more guidance, please contact our International Tax team on 02 9957 4033.

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This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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