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  • Question 17

    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

    There are compliance risks associated with restructures, particularly those involving international related parties. In order to analyse the compliance risks of these restructures we need to understand the nature of restructuring undertaken by Australian taxpayers with international related parties. This question seeks to identify significant restructures undertaken between Australian taxpayers and international related parties.

    This question also collects information about restructures involving your branch operations. Aspects of this restructure may be reflected in internally recorded 'dealings' with your branch that record your attribution of your income and expenditure to the branch operations: refer to the Introduction of these instructions for more information.

    Accordingly, for the purpose of this question, also treat the reference 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.

    For the purposes of this question we wish to adopt a wide meaning of the term restructuring which goes beyond the generally accepted financial definition.

    Restructuring for the purposes of this question refers to arrangements whereby assets, functions and/or risks of a business are transferred between you and international related parties where the value of the change exceeds $50 million. This may include:

    • reorganisation of your structure resulting in the disposal or acquisition of entities or the change in ownership of entities
    • establishing, expanding, downsizing, liquidating or relocating business operations or business lines, resulting in
      • the acquisition and/or the disposal of assets or liabilities (tangible or intangible)
      • the transfer of functions between yourself and international related parties (eg transfer of trading, sales or marketing functions)
      • the movement of risks between yourself and international related parties
      • the increase or decrease of rights or obligations
      • the significant modification of service arrangements
       
    • where there has been a change in the nature of the business carried on through your branch operations, for example, you have commenced or ceased to use your property in your branch operations or you have commenced or ceased to perform functions or services through your branch operations
    • the dollar amounts or values asked for in this question are all based on your accounting records. We recognise that this question requires you to determine whether the value of a restructure is greater than $50 million, even though there may not be payment of consideration in respect of some transactions forming part of the restructure. For these transactions we ask you to make a reasonable determination of the value and we do not expect you to obtain a formal valuation for this purpose.

    To complete this question, you need to:

    • determine if you undertook any restructures where the value of the restructure exceeded $50 million
    • disregard all restructures where there is no international related party involvement
    • then determine the three restructures with the highest dollar value
    • for each of these three restructures
      • identify the principal international related party involved in the restructure
      • determine if this related party was either a related branch or a related entity
      • determine the country where this related party was located
      • describe the nature of the restructure in terms of the assets, liabilities, functions, risks, rights or obligations
      • determine the overall affect of this restructure, in terms of acquiring or disposing of assets, liabilities, functions, risks, rights or obligations.
       

    In the first two columns, place a cross in the box:

    • at C, I or O if the principal international related party involved in respect of the restructure was not a branch
    • at D, J or P if the principal international related party involved in respect of the restructure was a branch.

    In the third column, at E, K or Q specify the code of the country in which the principal international related party to the relevant restructure was located.

    Further Information

    For the list of codes for all countries, refer to Appendix 3.

    End of further information

    In the fourth column at F, L or R, specify the code that best describes the nature of the restructure in terms of the asset, liability, function, risk, right or obligation.

    Further Information

    For the list of codes describing the nature of the restructure, see Appendix 8.

    End of further information

    In the last two columns, place a cross in the box:

    • at G, M or S if the overall affect of the restructure was the acquisition of assets, liabilities, functions, risks, rights or obligations
    • at H, N or T if the overall affect of the restructure was the disposal of assets, liabilities, functions, risks, rights or obligations.

    If the restructure equally applied to the acquisition and disposal of assets, liabilities, functions, risks, rights or obligations, place a cross in both the acquisition and disposal boxes.

    Example

    During the income year an Australian resident taxpayer shut down its Singapore branch operations. This included ceasing to carry on trading in derivative contracts through its Singapore branch operations. However, the taxpayer continued to carry on trading in those same derivative contracts other than through its Singapore branch. Other assets were sold to different entities. The following provides a summary of the transactions that were undertaken as part of the restructure.

    Item

    Disposing entity location and type

    Related to Aust taxpayer

    Acquiring entity location and type

    Related to Aust taxpayer

    Dollar value

    Derivative portfolio

    Singapore branch

    Yes

    Australian entity (excluding Singapore branch operations)

    Yes

    $400,000,000

    Singapore building

    Singapore branch

    Yes

    Jersey subsidiary

    Yes

    $45,000,000

    Furniture and equipment

    Singapore branch

    Yes

    Singapore entity

    No

    $21,000,000

    Total

    $466,000,000

    In this example there are several relevant events involved in closing the Singapore branch operations. These events are all part of the same restructure.

    The Australian taxpayer does not report the transactions involving the sale of the building and furniture and equipment as an Australian resident is not a counterparty to these transactions since, for the purpose of this question, a resident's offshore branch operations are treated as a separate party located in the branch jurisdiction.

    The Australian taxpayer completes question 17 as follows.

    Example of question 17 completed

    Last modified: 09 Nov 2011QC 24292