The Australian Taxation Office published a Practice Statement Law Administration 2016/2 (PS LA 2016/2) to deal with the application of transfer pricing penalties during the transition period between 1 July 2004 and 28 June 2013. During that period, two transfer pricing regimes in Division 13 of the Income Tax Assessment Act 1936 and Subdivision 815-A of the Income Tax Assessment Act 1997 applied concurrently. From 29 June 2014, these rules were replaced by Subdivisions 815-B and 816-C of the ITAA97.
PS LA 2016/2 states that if a determination under Subdivision 815A is made in respect of the transition period, the ATO personnel should assess whether resources should be allocated to apply penalties under Division 13 and whether it is appropriate for the penalties to be fully remitted. If it is not correct to fully remit the penalties and PS LA 2016/2 also clarify the computation of the shortfall penalties and matters that are relevant for a partial deduction of the penalties.
Penalties for transfer pricing shortfall amounts before the transition period continue to be governed by Taxation Ruling 98/16 and penalties after the transition period by Practice Statement Law Administration 2014/2.
