Worldwide transfer pricing reference guide 2014

Australia (continued)
Documentation requirements (continued)
• Include business, economic and industry analysis
• Be relevant to the Australian operations (i.e., country and company specific)
In addition, taxpayers are expected to implement a review process to ensure that transactions and outcomes are reviewed at appropriate
intervals and to ensure that the impact of material changes in the business are considered and documented.
Under subdivision 815–B, taxpayers that do not prepare contemporaneous transfer pricing documentation that meets the specific
requirements set out in 284–E are precluded from having a RAP in the event of a transfer pricing adjustment. Whereas there is an
expectation that ATO guidance on documentation will be based on current guidance, the new legislation will require substantially more
analysis to be conducted if a taxpayer is to qualify for a RAP.
In order to satisfy 284–E it is required to maintain documents that:
• Are prepared contemporaneously (i.e., before the time by which the taxpayer lodges its income tax return)
• Are prepared in English, or readily accessible and convertible into English
• Explain the particular way in which the relevant transfer pricing provisions apply (or do not apply) to the taxpayer’s international
related party dealings
• Explain why the application of the transfer pricing provisions to the taxpayer’s international related party dealings in the afore
mentioned way, best achieves the consistency with the relevant guidance materials 1 (e.g., 2010 OECD Guidelines)
In combination with the manner in which Subdivision 815–B operates, this will mean that historical documentation and global
documentation that is prepared without specific regard to the new legislation is unlikely to be sufficient to establish a RAP for penalty
mitigation purposes. Additional information that should be considered when preparing documentation for Australian penalty mitigation
purposes includes:
• An explanation of the way in which the Subdivision applies (or does not apply)
• An explanation of why the application of Subdivision as documented best achieves consistency with the guidance material such as the
OECD Guidelines
• An assessment of whether the actual Commercial or Financial Relations (CoFR) can be used to determine the arm’s length conditions
or whether a substitution with hypothetical CoFR is required
• An assessment of the comparability of the actual circumstances with the circumstances used to establish the arms’ length conditions
• An ascertainment of the actual and the relevant arm’s length condition
• An ascertainment of the result of the application of the Subdivision in that particular way, compared to the non-application of the
Subdivision
Documentation deadlines
Under Division 13 and Subdivision 815–A, there is no explicit requirement to prepare transfer pricing documentation within a particular
timeframe. However, taxpayers are strongly encouraged to maintain contemporaneous documentation showing compliance with the
arm’s length principle.
Under Subdivision 815–B, any transfer pricing documentation should be contemporaneous, which means it needs to be completed at the
time of lodging the tax return. If transfer pricing documentation is not prepared by the time the tax return is lodged, the taxpayer cannot
have a RAP for penalty protection purposes.
Statute of limitations on transfer pricing assessments
Historically, there has been no statute of limitations with respect to transfer pricing adjustments. The tax legislation applicable for
financial years starting before 1 July 2013, specifically empowers the Commissioner to make amendments to tax assessments
in any year for transfer pricing adjustments under Division 13. As such, the years starting before 1 July 2013 remain open to
challenge indefinitely.
1 Guidance materials are outlined in sections 815–135 and 815–235.
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