• Question 6

    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

    To evaluate and monitor the compliance risks in respect of Australian taxpayers' international related party dealings apart from those in specified countries we need to identify the principal countries where those dealings are undertaken and identify the nature and significance of the activities undertaken in those countries.

    If you had international related party dealings during the income year, disregarding your dealings with parties located in any of the specified countries, answer yes to this question and complete the required fields.

    This question also collects information about use of your property, services or any other benefit in your offshore branch operations not carried on in the specified countries 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.

    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, where you arranged for the purchase of a currency swap on behalf of your customer such that a related foreign subsidiary served as the contracting party this would not be included in the answer to this question. However any service fee you received from this related foreign subsidiary for arranging the transaction would be an international related party dealing that would be included in the answer to this question.

    The dollar amounts or values asked for in 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 international related party dealings
    • disregard all your dealings with related parties located in specified countries
    • group your remaining dealings according to the country where the related party is located
    • total the dollar value of your dealings (expenses/losses plus revenue/gains, excluding principal and principal repayment amounts) for each country
    • determine the three countries that have the highest dollar value of related party dealings
    • then, in respect of the three countries with the highest dollar value of related party dealings, group the dealings in each of the countries according to activity type
    • total the dollar value of your dealings (expenses/gains plus revenue/losses, excluding principal and principal repayment amounts) for each activity type
    • work out the three activity types with the highest dollar value for each of the three countries.

    In the first column at C, M and W, list the codes of the three countries with the highest dollar value of international related party dealings.

    List these codes in descending order of total dollar value.

    Further Information

    For the list of country codes, see Appendix 3.

    End of further information

    In the second column labelled Activity code, list the codes of the three activity types with the highest dollar value of international related party dealings in relation to each of the countries identified in the first column.

    List these codes in descending order of total dollar value.

    Further Information

    For the list of activity type codes, see Appendix 5.

    End of further information

    In the third column labelled Expenditure, provide the total amount of expenditure/losses incurred (excluding principal and principal repayment amounts) in respect of each activity type identified in the second column in relation to the relevant country identified in the first column.

    In the fourth column labelled Revenue, provide the total amount of revenue/gains earned (excluding principal and principal repayment amounts) in respect of each activity type identified in the second column in relation to the relevant country identified in the first column.

    Example

    During the income year an Australian taxpayer undertook the following international dealings.

    Country entity located

    Relation to taxpayer

    Activity

    Activity code

    Expenditure

    Revenue

    Total dollar value

    Brazil

    Branch of subsidiary

    Derivatives

    6

    6,650,000

    6,890,000

    13,540,000

    Canada

    Branch

    Loan

    7

     

    300,000

    300,000

    Canada

    100% subsidiary

    Derivatives

    6

    1,360,000

    4,000,000

    5,360,000

    Canada

    100% subsidiary

    Guarantees

    8

     

    870,000

    2,070,000

    Canada

    Branch

    Other

    99

    2,470,000

    790,000

    3,260,000

    Egypt

    100% subsidiary

    Advisory services

    2

     

    400,000

    400,000

    Egypt

    100% subsidiary

    Loan

    7

    3,666,000

    4,330,000

    7,996,000

    Egypt

    95% subsidiary

    Leasing

    10

    280,000

    300,000

    580,000

    France

    100% subsidiary

    Advisory services

    2

     

    500,000

    500,000

    France

    Branch

    Loan

    7

    6,560,000

    5,680,000

    12,240,000

    France

    na

    Derivatives

    6

    4,580,000

    4,450,000

    9,030,000

    Japan

    100% subsidiary

    Loan

    7

    6,320,000

    4,100,000

    10,420,000

    Japan

    Branch

    Treasury services

    14

     

    200,000

    200,000

    Vietnam

    100% subsidiary

    Derivatives

    6

    3,850,000

    3,600,000

    7,450,000

    Vietnam

    100% subsidiary

    Other

    99

    2,450,000

    450,000

    2,900,000

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

    Country entity located

    Total expenditure amounts

    Total revenue amounts

    Total dollar value amounts

    Brazil

    6,650,000

    6,890,000

    13,540,000

    Canada

    5,030,000

    5,960,000

    10,990,000

    Egypt

    3,946,000

    5,030,000

    8,976,000

    France

    6,560,000

    6,180,000

    12,740,000

    Japan

    6,320,000

    4,300,000

    10,620,000

    Vietnam

    6,300,000

    4,050,000

    10,350,000

    Note: The expenditure incurred and the revenue earned in relation to derivatives transactions in France were disregarded in calculating the total value of transactions in this country because they were undertaken with unrelated parties.

    With this information the Australian taxpayer completes question 6 as follows.

    Example of question 6 completed

    Note: The Australian taxpayer recorded:

    • the highest value of related party dealings in Brazil, even though these dealings related to one activity type, derivatives
    • the Australian taxpayer will complete the first row for the first country recording the relevant information in respect of the taxpayer's derivatives dealings
    • the remaining fields relating to the first country will be left blank, indicating the Australian taxpayer did not have any other related party dealings in Brazil
    • its second highest value of related party dealings in France
    • the Australian taxpayer will complete the first two rows for the second country recording the relevant information in respect of the taxpayer's related party dealings - financing activities and advisory services
    • the remaining fields relating to the second country will be left blank, indicating the Australian taxpayer did not have any other related party dealings in France
    • its third highest value of related party dealings in Canada
    • the Australian taxpayer undertook four types of activities in Canada, only the three activities with the highest values are entered into the relevant fields of this question. That is, the details of the Australian taxpayer's internally recorded loan for its Canadian branch operations is not shown at this question in this schedule.
     
    Last modified: 09 Nov 2011QC 24292