On 10 December 2020, the Australian Taxation Office (ATO) issued final transfer pricing guidance on interest-free loans between related parties, in “Schedule 3 – Interest-free loans” to the ATO’s financing Practical Compliance Guideline (PCG 2017/4). The schedule has effect as from 1 January 2020 and applies to existing and newly created related party interest free loans.
The schedule covers only outbound interest-free loans between related parties for transfer pricing purposes and focuses on factors under which the PCG risk score for outbound interest-free loans with related parties, based on schedule 1 of the PCG, might be modified; and practical guidance as to when the ATO will dedicate resources to review arrangements involving interest-free loans.
