The Australian Taxation Office (ATO) has published the final Practical Compliance Guideline PCG 2017/4 on its compliance approach to cross-border related financing arrangements. The guidance explains how taxpayers can price related party loans to demonstrate they are ‘low risk’ and avoid compliance action.
The PCG was first issued as draft PCG 2017/D4 on 16 May 2017. The final PCG incorporates the following changes:
- a clear articulation of the various indicators and how they interact with one another to determine the risk zone of a related party financing arrangement,
- adjustment of some of the risk indicators to align with the Australian market,
- a clearer explanation of the risk rating process, which makes it easier to self-assess the risk zone of related party financing arrangements.
