Australia’s tax authority plans to update its transfer pricing benchmarking tool by December, including refreshed profit markers and a new low-risk “white zone” for certain inbound distributors.
The Australian Taxation Office (ATO) is revising its guidance (PCG 2029/1) on transfer pricing risks for businesses that import foreign goods and digital services.
The ATO also plans to update its benchmarking tool by December, refining how it evaluates transfer pricing risk and introducing a new low-risk “white zone” for eligible taxpayers.
Under the current framework, the ATO assesses risk using “profit markers,” which measure an inbound distributor’s earnings before interest and taxes and compare them with both industry-level and company-specific benchmarks.
According to the ATO, the upcoming update is intended to keep these profit markers accurate, relevant, and aligned with current market conditions.
What this guideline is about
This guideline outlines ATO’s compliance approach to the transfer pricing outcomes associated with the following activities of inbound distributors:
- distributing goods purchased from related foreign entities for resale, and
- distributing digital products or services where the intellectual property in those products or services is owned by related foreign entities.
Such activities, together with any related activities involving the provision of ancillary services, are referred to in this Guideline as “inbound distribution arrangements”.
This guideline applies to inbound distribution arrangements of any scale. Where you are an inbound distributor and you choose to adopt the distributor simplified transfer pricing record keeping option in Practical Compliance Guideline PCG 2017/2 Simplified transfer pricing record keeping options, this Guideline will not apply and instead we will follow the compliance approach set out in PCG 2017/2.
This guideline is limited to the transfer pricing risks associated with inbound distribution arrangements. It does not affect our compliance approach to other tax issues that might arise in connection with your inbound distribution arrangements (for example, the existence of withholding tax obligations or the application of the general anti-avoidance rule in Part IVA of the Income Tax Assessment Act 1936). If we consider that your inbound distribution arrangements pose a risk under other tax provisions, we will apply compliance resources to review your arrangements.
The framework set out in this guideline to can be used to:
- assess the transfer pricing risk of your inbound distribution arrangements
- understand the compliance approach we are likely to adopt given the transfer pricing risk profile of your inbound distribution arrangements
- work with us to mitigate the transfer pricing risk of your inbound distribution arrangements and be confident you have reduced your risk exposure, and
- understand the type of analysis we use when assessing the transfer pricing risk of your inbound distribution arrangements.
Structure of this guideline
- The main body sets out general principles relevant to our framework for assessing transfer pricing risk and applying compliance resources to inbound distribution arrangements to which the Guideline applies
- The schedules set out quantitative and qualitative indicators relevant to distributors generally or based on their industry sector, including those that operate in the life science, information and communication technology (ICT) and motor vehicle industries.
This guideline does not provide advice or guidance on the technical interpretation or application of Australia’s transfer pricing rules or other tax provisions.
Date of effect
This guideline applies from 13 March 2019 and will apply to existing and new inbound distribution arrangements.
Earlier, the ATO published updated guidance on the local and master file requirements, which applies to reporting periods beginning on or after 1 January 2024, and transfer pricing guidance for the private property and construction sector for 2025.
