The Australian Taxation Office (ATO) on 16 January 2017 released its practical compliance guideline (PCG) concerning the ATO approach to offshore related-party procurement, marketing, sales, and distribution hubs.
The aim of the PCG is to assist taxpayers to:
The PCG assigns hub arrangements one of six different transfer pricing risk categories or ‘zones’:
The requirements of each zone are detailed in a table [PDF 44 KB].
Hubs qualify for the white zone status if the ATO has already reviewed the hub and agreed to the transfer pricing outcomes, or agreed to an APA. Hubs in the white zone will not be required to self-assess their risk rating and will generally not be subject to further ATO review.
Hubs can qualify for the green zone status if their marketing profit is less than 100% of their costs. Hubs in the green zone will generally not be subject to ATO review or audit and can use the simplified transfer pricing recordkeeping concessions.
Hubs outside the white or green zones, are risk rated depending on:
Taxpayers can move into the green zone by adjusting hub pricing for the last four years, so hub profit is less than 100% of costs. While taxpayer will pay additional primary tax for those years, the ATO will generally remit any penalties or interest, and not undertake review or audit activity on the hub.
The PCG is effective beginning 1 January 2017 and applies to new and existing hub arrangements. At this stage, the PCG only applies to marketing hubs and not to shipping or procurement or other hubs.
For more information, contact a tax professional with the KPMG member firm in Australia:
Nick Warth | +61 8 9263 7731 | firstname.lastname@example.org
David Bond | +61 8 9263 7177 | email@example.com
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.