Advance pricing arrangements

APA and MAP program management unit

As part of the ATO’s reinvention agenda we have been reviewing our Advance pricing arrangement (APA), Mutual agreement procedure (MAP) programs and our Competent Authority Network to identify opportunities to:

  • improve the client experience and better support willing participation
  • improve our bilateral and multilateral engagement
  • increase our efficiency and effectiveness.

Law Administration Practice Statement PSLA 2015/4 replaces PSLA 2011/1 and provides guidance to ATO staff on APAs. It reflects a:

  • principle-based approach
  • streamlined process and practices to improve timelines
  • reduction in red tape.

The new practice statement draws upon lessons from the successful implementation of the early engagement approaches used for the processing of private ruling applications.

We have established a new APA/MAP Program Management Unit (PMU) and appointed new Competent Authorities (CA) to strengthen our existing network. The PMU is responsible for managing enquiries regarding the APA MAP programs, triaging and allocating applications, monitoring and administration of the programs and continually developing and updating procedures and processes.

What is an APA?

The APA program is an important part of our compliance assurance strategy.

APAs provide the opportunity to reach an agreement with us on the future application of the arm's length principle to your dealings with international related parties.

The arm’s length principle is applied where conditions between associated enterprises in their commercial or financial relations differ from those existing between independent enterprises. Where that happens any profits which would have accrued to one of the enterprises, but, by reason of those conditions, have not may be included in the profits of that enterprise and taxed accordingly (Paragraph 1 of Article 9 of the OECD Model Tax Convention on Income and on Capital as at 15 July 2014).

APAs provide a mechanism for managing and mitigating your transfer pricing risk by providing you with greater certainty on a prospective basis. Entering into an APA fosters a constructive working relationship. This relationship is built on mutual trust established through early engagement and full and frank disclosure throughout the creation of the APA. This is undertaken in a cooperative environment. Entering into an APA reduces the potential for double taxation on your covered cross border dealings.

The operation of the APA may depend on you complying with particular requirements, and certain critical assumptions being met. Where you have done this, we will be administratively bound by the terms of the APA. In this case, we will not impose any additional income tax to that payable based on the pricing worked out under the APA on the covered cross border dealings.The arrangement generally covers a period of three to five years and may be reviewed if trading circumstances materially change. APAs are also subject to an annual reporting requirement.

Types of APAs

Bilateral APA

A bilateral APA is an arrangement between the ATO's competent authority (CA) and the CA of a tax treaty partner country, as shown in the flowchart below. The Australian CA is a specifically delegated position of the Commissioner within the ATO. The CA may be described as a person authorised to negotiate MAP cases on behalf of the ATO. The respective CAs enter into an APA under the Mutual Agreement Procedure (MAP) Article of the relevant tax treaty. The CA of each treaty partner country confirms the terms of the APA in writing through a letter or similar document with their resident taxpayer and agrees to be bound by those terms.

A bilateral APA will give a similar assurance to the foreign entity dealing with the tax administration at the other end of the transaction. A bilateral or multilateral APA minimises the risk of double taxation for the covered cross border dealings.

 Bilateral APA

Multilateral APA

A multilateral APA is an arrangement between the relevant taxpayers, the ATO CA and the CAs of more than one tax treaty partner and binds all the parties.

Unilateral APA

An APA between the taxpayer and the ATO is referred to as a unilateral APA where the APA does not involve or require agreement with the CA of a tax treaty partner country. A unilateral APA will provide you with an assurance that, for the term of the APA, we accept the treatment you gave to the covered dealings.

Economic double taxation can arise under a unilateral APA where the tax administration of the foreign country forms a different view as to the application of the arm's length principle to the cross border dealings covered by the APA. If there is a tax treaty between the foreign country and Australia, the Australian CA will seek to support the transfer pricing outcomes of the unilateral APA during CA discussions.

When is an APA appropriate?

Many Australian based entities participate regularly in the ever-evolving dynamic market that is world trade. Multi-national entities (MNE) and cross border dealings are critical to this global dynamic. As a necessary consequence, there has been an increasing focus and emphasis on transfer pricing and its impacts for revenue authorities.

If you have cross border dealings and you need assurance that those dealings comply with the arm’s length principle, you may seek an APA. Situations where you may seek an APA include where the dealings are between:

  • related or unrelated separate legal entities (including permanent establishments of separate legal entities)
  • a permanent establishment and its head office
  • two permanent establishments of the same entity.

Refer to Sections 6, 7 and 12 of PS LA 2015/4 Advance Pricing ArrangementsExternal Link for details as to what we consider when determining whether to enter into an APA.

Process overview

Law Administration Practice Statement, PS LA 2015/4 Advance Pricing ArrangementsExternal Link provides detailed guidance on Advance Pricing Arrangements. The practice statement provides guidance to ATO staff and contains a diagrammatic overview of the process for entering into an APA.

Mutual expectations

The APA process is a co-operative one requiring a relationship of mutual trust between the parties to achieve an effective outcome. In building that mutual trust expectations we may have of each other include:

  • all parties will co-operate fully with each other, including undertaking open and ongoing dialogue in the development of the APA
  • each APA request will be treated on its merits according to its own facts
  • each party will act transparently, in particular each party will disclose all relevant and material facts
  • each party will provide prompt and complete replies to any reasonable queries.

Note that in accordance with the principles stated above, any information you provide in the course of the APA process may be provided to the other tax authority where a bilateral or multilateral APA is being sought. You may withdraw from the APA process at any time.

Early engagement stage

You can apply for an APA by lodging a request for advance pricing arrangement early engagement at The completed request needs to contain an outline of the APA you propose. Information you should provide is set out on the request form and includes:

  • name and tax residence country of the other parties involved in the proposed APA
  • explanation of how the Australian operations fit into the global structure of the group
  • outline of the roles of the Australian entities within the global value chain
  • term of the proposed APA
  • cross border dealings to be covered by the proposed APA
  • other cross border dealings not to be covered by the proposed APA
  • proposed transfer pricing methodology
  • collateral issues
  • critical dates.

You may consider providing additional information with your request which may include:

  • global group structure
  • role of Australian entity in the MNE
  • during the early engagement stage, we will work with you to develop a plan for the early engagement stage and a draft plan for the APA application stage.


When the Internationals Gatekeeper receives the completed request for early engagement, the APA request will be assigned to an APA team. Where necessary, an officer from the APA team will contact you to confirm our understanding of the APA proposal. The request is reviewed at triage and at the APA request review workshop. At the workshop a decision is made whether to progress the APA request. If your APA request is not going to progress, you will be advised in writing of the reasons for that decision. If you are unsatisfied, you can make further submissions to the APA team leader. If the APA request is still not accepted, you may submit a request for an internal review of the decision to the Internationals Gatekeeper. This review is undertaken by the head of the PMU or another senior officer with no prior involvement in your APA request.

Preliminary discussions

Preliminary discussions are held as part of the cooperative relationship that underlies our entering into an APA. The aim of these discussions is to explore avenues for the appropriate treatment of the covered cross border dealings and any collateral issues.

Openly discussing your APA request should stimulate a free flow of information between us and lead to a more robust review of the request and any supporting documentation. Such discussions should facilitate your lodgement of a formal APA application and the subsequent agreement to a workable and practical APA. Further information about preliminary discussions from the perspective of ATO staff is available in PS LA 2015/4 Advance Pricing ArrangementsExternal Link. At the end of these discussions we will know what to expect if and when you lodge a formal APA application.

APA Application Stage

Information and documentation requirements

The extent of information/documentation necessary to determine an appropriate transfer pricing methodology and arm’s length outcome depends on the facts and circumstances of each individual case. We do not prescribe any set format or method of presentation of your formal APA application. We will discuss and agree what information documentation is required. This will be set out in the APA case plan that we develop and agree to as part of early engagement. We will only require you to provide the information we consider material and relevant to the analysis and evaluation of the APA proposal.

When preparing your formal APA application, the level of documentation you should provide must allow us to ascertain the following:

a) the actual conditions relevant to the cross border dealings which are the subject of the proposed APA

b) the arm’s length conditions relevant to the cross border dealing(s)

c) the particulars of the method used and comparable circumstances relevant to identifying those arm’s length conditions

d) the expected result of the application of the proposed method

e) factors and assumptions so significant that, in an arm’s length situation, the parties would not continue to be bound by the agreement if they changed (critical assumptions)

f) further information and documentation as agreed to in the early engagement stage or that may be of assistance to progress your APA application

In order to ascertain each of the above points you may wish to include in your APA application, in addition to the information in the request for APA early engagement, more detail on the following:

a) Actual conditions

  • The MNE and company group of which you are a member, including details of the ownership and organisational structure and geographical locations
  • The global value chain of the MNE including identification of the important drivers of business profits and your contribution to that global value chain
  • In the case of the bilateral/multilateral APA, the countries of residence of the other parties and the countries in which they conduct business
  • A description of the size, nature or characterisation and value of the covered cross border dealings
  • A list and brief description of important international agreements between members of the MNE group
  • A description of the actual economic activity occurring between members of the MNE group
  • Where the form of the cross border dealings differs from their actual economic activity, an explanation of why you consider this to be the case
  • A description of the industry and the main geographic markets in which you operate
  • An explanation of your positon in the industry, including a list of major competitors
  • A functional analysis describing the principal contributions to value creation by individual entities within the group, i.e. key functions performed, important risks assumed and important assets used

b) Arm’s length conditions

  • Proposed source(s) of comparable data and the key characteristics or criteria to be met by uncontrolled transactions in order to be regarded as potentially comparable
  • A description of the proposed comparables and an analysis of the key comparability factors between the comparables and your entity
  • Details and calculations of any proposed adjustments to the comparables results

c) Proposed transfer pricing methodology

  • A description of the proposed transfer pricing methodology(ies) and the reasons why you consider that method the most appropriate
  • Whether or not you currently use a recognised transfer pricing method to test or set the actual transfer prices of cross border dealings. If not, what method you use to set your prices
  • Where applicable, a description of the most appropriate profit level indicator and the reason(s) for its selection
  • Sufficient data to apply the transfer pricing methodology and to demonstrate that the outcome produced is arm's length
  • The proposed arm's length outcome or range which results from the application of the transfer pricing methodology
  • The process by which you propose to make any necessary adjustments to your actual results during the course of the APA (compensating adjustments) and the reasons for your choice of process

d) Expected results

  • Likely or forecast outcomes from the proposed methodology (including sensitivity analysis indicating factors that impact profitability and how sensitive profitability is to changes in those factors) during the term of the APA

e) Critical assumptions

  • The APA application should define any factors or assumptions that are so significant that if they were to change in specified ways, the appropriateness of the terms of the proposed APA, or the basis upon which it were agreed, would be challenged and neither party in an arm’s length situation would continue to be bound by the terms of the APA

f) Further information

  • Information/documentation as agreed in the early engagement stage
  • The tax and financial position of all parties involved in the APA, or at the aggregate tax jurisdiction wide level, for the last 3 years, including earnings, profit (loss) before income tax, tangible assets other than cash and cash equivalents, number of employees and any other relevant data
  • Information on forecast/budgeted financial position during the APA period for all parties involved in the APA
  • Any other information that may be of assistance in progressing your APA application

In the case of a bilateral APA, you should also advise the ATO of the information or documentation requests made by the tax treaty partner(s) in relation to the APA application and ensure that the ATO is provided with copies of any information or documentation supplied by the foreign entity or their affiliates to the tax treaty partner(s).

We may request an English translation of any documents you provide in a foreign language.

Your formal APA application should be lodged with the Internationals Gatekeeper within the timeframe agreed to at the early engagement meeting(s) and/or as set out in the agreed APA case plan(s).

Following your lodgment of the formal APA application with the Internationals Gatekeeper, subsequent communication regarding your APA should be with the APA team handling the case. In the case of any dispute arising in the APA process please refer to section 20 of PS LA 2015/4 Advance Pricing ArrangementsExternal Link.

Form of provision of information

Where there are a large number of records or documents in support of your formal APA application, we may agree that some or all of these need not be provided with the application. Such documents should be referenced in the APA application and made available if requested.

Processing an APA Application

As part of critically analysing and evaluating your APA application and any supporting information and documents you have provided, the APA team may ask you about particular aspects of the APA application. We may request you to provide explanation or further information or may seek to interview some of your key commercial staff. If our analysis and evaluation results in a different functional analysis conclusion to the one you describe in your APA application, we will discuss this with you with a view to reaching agreement.

In the case of a bilateral or multilateral APA, the Australian CA will undertake any negotiation with the CA of the other tax treaty partner(s). Although you are not a party to these negotiations, in limited circumstances you may be requested to make a presentation on factual matters where both CAs agree that clarification of the actual fact pattern will enhance their level of understanding.

The APA Document

For a unilateral APA, the form of the APA will normally be a document setting out the terms of the arrangement which is signed by both parties.

For a bilateral or multilateral APA, when an agreed arrangement is reached by the CAs you will be given the opportunity to accept or reject that arrangement. Where you accept the APA negotiated and agreed between the CAs, you and the ATO will enter into a separate arrangement. The form of this arrangement could include:

A written agreement based on the terms of the APA agreed between the CAs signed by you and the Australian CA

A signed statement that you will abide by the terms of the arrangement negotiated by the CAs, or

Some other documentation demonstrating your consent to abide by the terms of the APA agreed by the CAs

If you reject the arrangement negotiated and agreed between CAs, then the bilateral or multilateral APA will not proceed. You may wish to discuss with the APA team the options where you reject an agreement negotiated by the CAs. Options in this regard may include you agreeing to conclude the matter as a unilateral APA.

Monitoring and Compliance Stage

Annual Compliance Report

As part of the APA terms, you will be required to prepare and provide us with an Annual Compliance Report (ACR) for each year of the APA. The ACR is separate from any requirement you have to lodge your income tax return.

Your ACR should include:

  • an analysis of your compliance with the APA including the information and calculations demonstrating the outcome of the application of arm’s length methodology
  • details of any compensating adjustments made and how each was effected in the income tax return
  • whether there has been a breach of any critical assumptions.

The ACR is to contain sufficient information to detail your actual results for the year and to demonstrate your compliance with the terms of the APA. We will tailor the specific requirements to be included in your ACR during the APA process.

At the time of lodging your income tax return for an income year, or such other time specified, you send the ACR for the same income year to the Internationals Gatekeeper. In a bilateral APA, a similar reporting product may be required by the other tax treaty partner in respect of the other party to the APA. In some instances the ACR requirements of each jurisdiction may be specified in the bilateral agreement.

We will review your ACR on the basis of your audited financial statements and may require you to provide further information to verify that you have complied with the terms of the APA. Your public officer should make the following declaration:

I declare that I have examined the information contained in this APA Annual Compliance Report, including accompanying documents, and to the best of my knowledge and belief, the facts presented within this report and accompanying documents are true, comprehensive and accurate.

Where we are satisfied that you have complied with the terms of the APA, we will provide you with written advice to this effect. You will only be contacted where it is necessary to clarify the contents of the ACR or to request further information. In the case of a bilateral APA, the tax treaty partner may also review their equivalent ACR. If they raise any issues, the Australian CA may then need to seek additional information from you.

If you provide the information above you will be considered to have satisfied the requirements of subdivision 284-E of Schedule 1 to the Taxation Administration Act 1953.

The terms of an APA will generally state that the APA may be revised, modified, suspended or cancelled if:

  • you fail to provide an ACR
  • you fail to provide additional information requested within a reasonable time
  • your records do not enable us to confirm readily that the transfer pricing methodology was applied as required by the terms of the APA and that critical assumptions were met.

In this case, we would no longer be bound administratively by any undertaking not to conduct active compliance activity relating to the transfer pricing issues covered by the APA. If it is discovered that the ACR was false or misleading, the previous issue of an acknowledgment letter would not prevent us undertaking follow-up action. Some tax treaty partners retain the right to review or audit their corresponding taxpayer on APA covered dealings at any time.

If we cancel your APA as a result of non-compliance with its terms, you will be considered to have satisfied the requirements of subdivision 284-E up to the point of cancellation of your APA.

Record keeping

You must retain all records relied upon in concluding the APA and all supporting data referred to in any ACR or used in applying the APA. The APA may specify the record retention period or specifically provide that certain records need not be retained.

Unless otherwise stated in the APA, you are required to keep all records in respect of the covered dealings in accordance with the record keeping requirements under section 262A of the Income Tax Assessment Act 1936. You do not need to create or retain any records in addition to those mentioned above to satisfy the requirements of subdivision 284-E of Schedule 1 to the Taxation Administration Act 1953. You should make available any records needed for the purpose of monitoring the APA within a reasonable time upon request. If it is found that any of the critical assumptions and/or conditions have not been adhered to, or where the records do not enable us to readily confirm that such assumptions and conditions have been met, we will consider cancelling the APA for the remaining term.

In the event you apply for an APA but negotiations subsequently breakdown and no APA eventuates, the documentation provided in support of your application through the early engagement and APA application stage may be taken into account when determining whether you have met the requirements of subdivision 284-E.

Breach of critical assumptions

If there is a breach of a critical assumption, as part of our relationship of mutual trust and consistent with the co-operative nature of the APA, you should tell us immediately. We will enter into discussions with you to clarify why the breach occurred and, if needed, all parties (including the tax treaty partner in a bilateral APA) will enter into discussions to revise, modify, suspend or cancel the APA. Any supporting documentation and any proposed course of action you may suggest (for example, revision of the APA) should be lodged as early as possible.

When looking at a change in circumstances, including general or economic downturn, we would assess whether arm's length parties could reasonably have been expected to foresee or anticipate that change in circumstances at the time the APA was entered into. If so, we would consider whether the agreed transfer pricing methodology sufficiently took this into account. We would apply the arm's length principle to determine whether any change in critical assumptions is such that arm's length parties would have renegotiated the arrangement due to the change in circumstances.

If the APA is revised or modified, the effective date of the revised or modified APA will be stated in the new APA. The revised or modified APA should also note the date on which the original APA became no longer effective.

If a revised or modified APA cannot be negotiated, the APA will be cancelled. Unless otherwise agreed, the APA will be cancelled as from the date the critical assumption was breached. If a transactional profit method is the primary methodology that has been used in the APA, the APA will generally be cancelled with effect from the beginning of the income year in which the critical assumption was breached. In such circumstances the methodology generally applies to the dealings that occurred throughout the whole of the income year.

Compensating adjustments

Australia's domestic tax laws will determine the treatment to be afforded to any compensating adjustments or payments for the purpose of calculating taxable income for Australian tax purposes. Generally, you will be requested to suggest an appropriate mechanism that suits the circumstances of your business. The treatment and its tax effect will be discussed and agreed upon during the APA process.

For example, assume you incur a further liability under the agreed APA, after the close of the income year, because your actual results exceeded the top of an agreed range or result. Generally, that further liability will only be allowed as a deduction in the year in which it is incurred despite the fact that the adjustment may relate to international related party dealings undertaken in the previous year. However, that deduction would be allowable for the previous year if the liability under the agreed APA had been incurred prior to the close of that income year and the subsequent adjustment was merely a calculation exercise.

Collateral Issues

A collateral issue is an administrative or tax issue in relation to your affairs in addition to the cross border dealings that are the subject of the APA.

When applying for an APA you need to identify any collateral issues that may impact on the operation of the APA, or that we may need to consider when deciding whether it is appropriate to proceed with an APA, for example, the possible applicability or otherwise of anti-avoidance rules. Where you or the APA team identify a collateral issue(s) you will need to provide an analysis of the application of the law to that issue(s).

Collateral issues may need to be considered in conjunction with your APA request. Where possible, collateral issues will be addressed and resolved in parallel with the development of the APA. You may need to work with us to ensure that any collateral issues are appropriately resolved within an agreed timeframe.

You will need to discuss with the APA team at the preliminary discussion step how collateral issues should be addressed. Options for addressing collateral issues may include:

  • applying for a private binding ruling, or other interpretive assistance product
  • consideration of the issue by tax technical personnel within the ATO
  • having a risk assessment product applied to the issue
  • obtaining counsel opinion on the issue.

Anti-avoidance provisions as a collateral issue

Consistent with the treatment of other collateral issues, we will consider the possible application of Part IVA of the Income Tax Assessment Act 1936 or other specific anti-avoidance provisions that may arise in relation to the cross-border dealings to be covered by the proposed APA in conjunction with your APA request. Where you request a private binding ruling in respect of these matters, the APA team leader will work with you to coordinate the ruling request.

Where it is found that Part IVA or another specific anti-avoidance provision may arise in relation to the cross border dealings to be covered by an APA, we will consider the transfer pricing issues arising as part of the APA request or application and those anti-avoidance matters concurrently. If Part IVA or specific anti-avoidance provisions may apply to transactions other than those to be covered by the proposed APA these issues will also be resolved in parallel with the progression of the proposed APA.


The APA team leader will consider whether transfer pricing issues in years prior to your proposed APA need to be resolved prior to or as part of the APA. Resolving transfer pricing issues in years prior to those covered by the APA is a collateral issue. One method that may be available to resolve such an issue is to apply the transfer pricing methodology developed for the APA to those prior years of income. This is called rollback. Rollback will be appropriate where there are no material changes to the covered dealings or the conditions that operate between the parties in the rollback period as compared to the APA period. See Section 24 of PS LA 2015/4 Advance Pricing Arrangements for further information.

Where there is a need to amend a prior year return as a result of addressing a transfer pricing issue in that year, the amendment will be treated as though you had made a voluntary disclosure, provided active compliance has not already been commenced, or we have not previously made contact with you or your representative(s) with respect to the prior year returns. Where active compliance has not commenced, additional penalty taxes, if any, will be calculated on the basis of you having made a voluntary disclosure in relation to each prior year. Where active compliance has commenced, the normal penalty provisions apply to any adjustments made to the years under review.


If you wish to renew your APA, you should seek renewal at least six months before the expiration of the existing APA to allow time for negotiation and conclusion. Generally, the renewal of an APA will follow the same procedure as the original APA request. In certain circumstances, however, it would be expected that the time taken to complete the renewal of an APA would be significantly less than an original APA.

For timeframes to be reduced you would have to provide any relevant information requested and demonstrate that:

  • you complied with the terms of the existing APA
  • the covered dealings are consistent with those in the existing APA
  • there are no material changes to functions, assets or risks for the taxpayer or other parties to the covered dealings
  • the transfer pricing methodology used in the previous APA remains the most appropriate
  • the critical assumptions in the existing APA are still appropriate.

We may require new or updated economic studies and supporting documentation. This decision will be made at the early engagement stage.

Where a renewal involves substantial changes to the terms used in the existing APA then the renewal process will probably have a similar timeframe to an original APA process.

If you have complied with the terms of the existing APA but have not demonstrated your commitment to fostering constructive working relationships and mutual trust with us, for example if your profitability was consistently at the bottom of an agreed range throughout the APA period, this will be taken into consideration when we make the decision whether to progress a renewal request.

Need assistance with an APA or MAP relief?

Enquiries relating to the application for an APA, MAP relief or the CA Network can be
directed to the APA/MAP program management unit. Initial contact with the Unit can be made:

When you make an APA application or apply for MAP relief, you will be advised of both the APA team who will be working on your case and the CA who will be authorising the case.

Competent Authority Network

The CA Network provides assistance to people who believe the actions of Australia or a treaty partner either result, or may result, in taxation that is not in accordance with a particular tax treaty.

CAs will be signing off for the Commissioner on both unilateral and bilateral APAs. If necessary, CAs will be available to meet applicants at the commencement and conclusion of cases.

The Competent Authority network comprises:

  • Deputy Commissioner International (Mark Konza)
  • Assistant Commissioner International (Lyndall Crompton)
  • Program Managers (Cameron Smith and Gloria Cassimatis)
  • SES Leaders (Paul Korganow)
  • SES Technical Resolution leaders (James Beeston, Annamaria Carey, Mathew Umina and Debbie Vegar)
  • Directors (Hayden Wells, Cathy Pugh, Robert Thomson, and Geoff Morris).

APA statistics

This table outlines key APA statistics for each income year (as at 30 June).






Total active APAs at 30 June





Total APAs completed










ATO initiated
Taxpayer initiated





New APAs





Average time to complete




29.82 months

20.02 months




11.09 months

11.76 months

APAs lodged and in progress at 30 June




















MAP statistics

As at December 2015, the ATO has 23 MAP cases on hand. This table summarises the MAP cases finalised in prior financial years.

Financial year

MAP cases


5 cases finalised as at December 2015


7 cases finalised


13 cases finalised


2 cases finalised


5 cases finalised

    Last modified: 11 Jan 2016QC 43088