This case focused on a major transfer pricing issue, where ATO claimed Alcoa underpriced its alumina sales to Aluminium Bahrain B.S.C. (Alba) from 1993 to 2009, causing a tax shortfall of over AUD 213 million.

Australia’s Administrative Review Tribunal ruled in favour of Alcoa of Australia on 30 April 2025 in its dispute with the Australian Taxation Office, involving the case Alcoa of Australia Ltd v Commissioner of Taxation [2025] ARTA 482.

This case focused on a major transfer pricing issue, where ATO claimed Alcoa underpriced its alumina sales to Aluminium Bahrain B.S.C. (Alba) from 1993 to 2009, causing a tax shortfall of over AUD 213 million. The case focused on Alcoa’s multi-billion-dollar alumina exports to Bahrain between 1993 and 2009, testing the old Division 13 transfer pricing rules of the ITAA 1936.

The dispute focused on whether the pricing terms between Alcoa and Alba followed the arm’s length principle, a key concept in transfer pricing.

The Tribunal addressed key issues:

  • The dispute focused on the ATO’s use of the Comparable Uncontrolled Price (CUP) method to assess Alcoa’s pricing, with the Tribunal reviewing its accuracy in the context of alumina market conditions.
  • Examining whether Alcoa and the Dahdaleh Entity conducted transactions at arm’s length.
  • Examining whether Alcoa received less than fair value for the alumina supplied, due to the lack of periodic price reviews in long-term contracts.

The ART ruled in favour of Alcoa, concluding that its dealings with the Dahdaleh Entity were at arm’s length, with pricing reflecting market conditions and industry norms.

The absence of annual price reviews in long-term contracts was deemed reasonable given market volatility. Additionally, the Tribunal confirmed that Alcoa’s use of the CUP method for pricing was appropriate and aligned with independent industry practices.

The ATO has 28 days to appeal the ART’s decision to the Federal Court. If it doesn’t appeal, the disputed tax claims, interest, and penalties will be withdrawn. Alcoa expects a refund of about AUD 67 million in prepaid taxes by June 2025, with a net cash impact of AUD 236 million over the next 14 months, including accrued taxes.