21 December 2011
The Assistant Treasurer has released a consultation paper on proposed changes to the transfer pricing rules to better align them with current OECD guidance.
These changes have been prompted by the outcome of some recent cases, especially the Full Federal Court’s decision in Commissioner of Taxation v SNF Australia Pty Ltd. Some of the proposed changes are expected to apply retrospectively from 1 July 2004. In particular, the Government intends to confirm that the transfer pricing provisions contained in Australia’s tax treaties operate as an alternative to Australia’s domestic transfer pricing rules.
it may be necessary to review existing transfer pricing practices. One option for dealing with uncertainty in this area is to enter into an advance pricing arrangement with Commissioner. An advance pricing arrangement is a legally binding agreement with the Commissioner which sets the prices or margins for international related party transactions. This can largely remove the uncertainty or risk associated with an adverse outcome following an ATO audit. However, this process can be time consuming and may not be a practical solution for smaller businesses.
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