Australia: ATO guidance for the Australian “Local file” | KPMG | US

Australia: ATO guidance for the Australian “Local file”

Australia: ATO guidance for the Australian “Local file”

The Australian Taxation Office (ATO) has published guidance on the “international related-party agreements” to be furnished in Part B of the Australian Local file for controlled transactions disclosed in Part A. The publication follows an initial round of consultation in late 2016.

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Overview

Among the provisions in the guidance are the following items.

  • The definition of an “agreement”—Agreements have been defined as executed written agreements. In contrast, other documents that evidence the terms and conditions (for example, emails) can be provided in Part B, but are not to be tagged as “agreements.”
  • When agreements have already been provided to the ATO—Agreements need not be re-attached. Instead, taxpayers can note the agreement’s title and year it was provided. Tracking which agreements have already provided could be difficult when the agreement titles are standardised within the group. 
  • Agreements not available to reporting entity—Reporting entities are required to note if an agreement exists but is unable to be obtained from the international related party (this would, given the definition of agreement, be unusual).
  • Overarching agreements—The guidance does not refer to “umbrella agreements” (a term used in the Australian Local file “high level design” and defined in the initial draft of the guidance). However, the final guidance does state that the “overarching agreement” (which contemplates that specific terms will be agreed in separate agreements) and other separate agreements must all be attached in Part B, subject to the agreements being part of a “relevant agreement series.”
  • Relevant agreement series—A key administrative concession is for a relevant agreement series. Transactions can be grouped in Part A (assuming a same transaction category), and only a “material representative agreement” needs to be attached for transactions that are part of a “relevant agreement series” (defined as a repeating series of transactions, that are on revenue account, with the same international related party, and with the same terms, except only for date, volume, price, and delivery). Terms are defined within the guidance, and there are additional criteria for derivatives, guarantees/indemnities, and insurance/reinsurance agreements. There are also special rules for banks and overseas banking units.

KPMG observation

Taxpayers need to consider performing an agreement “stock-take” and review their position and approach to be taken on agreements that may require liaison with the legal team and head-office functions. The agreement guidance also influences the grouping of transactions for Part A and, therefore, must be considered when completing Part A of the Australian Local file. Tax professionals expect the release of further guidance for Part A in the near future. 

 

For more information, contact a tax professional with KPMG’s Global Transfer Pricing Services practice in Australia:

Jane Rolfe | +61 3 9288 6341 | janerolfe@kpmg.com.au

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