On 22 November 2012, an exposure draft was released introducing new Australian transfer pricing rules with significant self assessment and documentation requirements. Interested parties were invited to comment on the exposure draft.
The start date for the proposed provisions is unknown and will be determined through a consultative process. However, after the enactment of the new rules, Div 815-A (introduced several months ago) will have “no further application” and Division 13, containing the existing transfer pricing rules, will be repealed. The transfer pricing rules will then be entirely contained in ITAA 1997. The rules would be included in new Divisions 815-B to 815-E and Div 815-A will only be applied to arrangements entered into from its date of application (1 July 2004) to the date of enactment of the new provisions.
The main objective of the new rules is to bring OECD transfer pricing principles into the Australian tax law. Where parties are not dealing with each other at arm’s length the new provisions aim to bring within the scope of Australian tax an amount that reflects the economic contribution made by the operations of the parties in Australia. The profits brought into tax would reflect the profits that would be earned in Australia by entities dealing at arm’s length and would reflect the totality of commercial relations between the entities.
