Australia: Transfer pricing-related measures in federal budget 2015

Australia: TP-related measures in federal budget 2015

Transfer pricing-related measures in Australia’s federal budget 2015 (delivered 12 May 2015) include:

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  • Proposed amendments to Australia’s transfer pricing recordkeeping rules to adopt the OECD’s country-by-country master file and local file documentation standards
  • A proposed doubling of transfer pricing penalties when a taxpayer does not have a “reasonably arguable position,” with the penalties increasing from 25% to 50% of the shortfall amount    
The changes would apply, if enacted as proposed, when the multinational group’s sales exceed AUD 1 billion (which generally aligns with OECD’s €750 million country-by-country threshold, under current exchange rates).

Effective dates

The proposals changes concerning the OECD documentation standards would be effective from 1 January 2016.

The proposed changes for the increase in transfer pricing penalties would be effective for income years commencing on or after 1 July 2015

Multinational anti-avoidance proposals

The federal budget 2015 also proposes to introduce measures to counter base erosion and profit shifting (BEPS) or BEPS-related structures that seek to avoid a taxable presence in Australia—referred to as the Multinational Anti-Avoidance Law. Read the government’s exposure draft release.

In this respect, tax professionals have observed that the Australian budget has “jumped the gun” and not waited for the OECD deliverables, to be presented to G20 in October 2015.

Australia’s federal budget 2015 does not follow the UK’s diverted profits tax regime, but proposes to amend Australia’s general anti-avoidance rules (known as “Part IVA”) so as to achieve much the same outcome (domestic anti-avoidance rules generally fall outside of the scope of income tax treaties, with the result that it may be difficult for treaty partners to assert a “treaty override”).

The government will be consulting on the Multinational Anti-Avoidance Law measure and has invited submissions by 9 June 2015.

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