• Question 5

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    In order to evaluate any potential compliance risks in respect of Australian taxpayers' dealings undertaken with related parties in specified countries, we need to understand the nature of these dealings. Therefore, we seek to identify the principal activities undertaken by Australian taxpayers and related parties in specified countries, where these activities are mainly undertaken and the extent/significance of these activities. This question seeks information on activities other than those dealt with in question 4.

    This question also collects information about use of your property, services or any other benefit in your offshore branch operations where your attribution of your income or expenses in relation to the property, services or other benefit is internally recorded as a 'dealing' with your branch operations: refer to the Introduction of these instructions for more information. Accordingly, also treat the reference in this question to a 'party' as though it extended to:

    • offshore branch operations carried on by an Australian resident - treat such operations as though they were instead a separate 'party' located in the branch country
    • Australian branch operations carried on by a non-resident - treat such operations as though they were instead a separate 'party' located in Australia.

    If you had related party dealings with entities in any of the specified countries during the income year, other than the dealings listed in question 4, answer yes to this question and complete the required fields.

    Only dealings conducted on the taxpayer's own behalf need to be taken into account in the answer to this question. That is, dealings by a financial services entity on behalf of its clients are not to be included. For example, transactions with a related party in specified countries in respect of cash management services on behalf of your customers would not be a dealing included in the answer to this question.

    The dollar amounts or values asked for this question are all based on your accounting records.

    The amounts reported at this question may be reported in the financial statements as revenue/gains or expenses/losses, depending on the accounting treatment of the relevant item (for example, for dealings in derivatives, you may report revenue from net cash flows or you may report a gain in fair value). Therefore for the purposes of this question, the terms: 'expenditure and losses' and 'revenue and gains' are interchangeable.

    To complete this question, you need to:

    • identify all your dealings with related parties located in specified countries during the income year
    • disregard all your related party dealings that were covered by question 4
    • group your remaining dealings according to activity type
    • determine the total dollar value of each activity type (expenses/losses plus revenue/gains, excluding principal and principal repayment amounts)
    • determine the three activity types with the highest dollar value of dealings
    • determine for each activity type identified in the first column the specified country where this activity type was principally undertaken
    • work out the expenditure/losses incurred and the revenue/gains earned (excluding principal and principal repayment amounts) in respect of the specified country identified in the second column in relation to the activity type identified in the first column.

    In the first column at C, G and K, list the codes of the three activity types with the highest dollar values in respect of your dealings with related parties located in specified countries (excluding activities listed in question 4).

    List these codes in descending order of total dollar value.

    Further Information

    For the list of activity types and codes, see Appendix 5.

    End of further information

    In the second column at D, H and L, provide the codes of the specified countries in respect of each of your activities identified in the first column that has the highest dollar value of those activities.

    Further Information

    For the list of specified country codes, see Appendix 2.

    End of further information

    In the third column at E, I and M, provide the total amount of expenditure/losses incurred (excluding principal and principal repayment amounts) in respect of each of your activity types identified in the first column in relation to the relevant specified country identified in the second column.

    In the fourth column, at F, J and N, provide the total amount of revenue/gains earned (excluding principal and principal repayment amounts) in respect of each of your activity types identified in the first column in relation to the relevant specified country identified in the second column.

    Example

    During the income year an Australian taxpayer undertook the following dealings with entities located in specified countries.

    Activity

    Relation to taxpayer

    Country entity located

    Expenditure amounts

    Revenue amounts

    Total dollar values

    Underwriting

    Branch of subsidiary

    Andorra

    1,500,000

    600,000

    2,100,000

    Derivatives

    100% subsidiary

    Andorra

    3,190,000

    4,220,000

    7,410,000

    Leasing

    Branch of subsidiary

    Andorra

    4,280,000

    1,770,000

    6,050,000

    Derivatives

    na

    Andorra

    1,300,000

    490,000

    1,790,000

    Underwriting

    Branch of subsidiary

    Belize

    2,450,000

    400,000

    2,850,000

    Derivatives

    100% subsidiary

    Belize

    2,145,000

    3,760,000

    5,905,000

    Leasing

    Branch

    Belize

    3,000,000

    1,600,000

    4,600,000

    Derivatives

    100% subsidiary

    Niue

    600,000

    500,000

    1,100,000

    Securitisation

    100% subsidiary

    Niue

    6,000,000

    8,500,000

    14,500,000

    Securitisation

    100% subsidiary

    Panama

    900,000

    450,000

    1,350,000

    Note: The expenditure incurred and revenue earned by the Australian taxpayer undertaking derivative transactions with unrelated parties in Andorra is disregarded in determining the total value of derivative transactions.

    The Australian taxpayer extracts the relevant data from the information above.

    Activity

    Activity code

    Total expenditure amount

    Total revenue amount

    Total dollar value

    Derivatives

    6

    5,935,000

    8,480,000

    14,415,000

    Leasing

    10

    7,280,000

    3,370,000

    10,650,000

    Securitisation

    12

    6,900,000

    8,950,000

    15,850,000

    Underwriting

    15

    3,950,000

    1,000,000

    4,950,000

    The three main activity types undertaken by the Australian taxpayer and related parties located in specified countries are securitisation, derivatives and leasing.

    With this information the Australian taxpayer completes question 5 as follows.

    Example of question 5 completed

    Last modified: 09 Nov 2011QC 24292