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Permanent establishments

Last updated 8 November 2011

Permanent establishment is defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). It includes:

  • business operations carried on by an Australian resident entity at or through a fixed place of business in another country
  • business operations carried on by a foreign resident entity at or through a fixed place of business in Australia.

Although branch operations are not an 'entity' or 'party' separate from the taxpayer who undertakes those operations, working out the taxable profits of branch operations involves attributing income and expenditure of the taxpayer on a separate entity basis.

For income and expenditure of the taxpayer that is not wholly or directly earned from, or incurred in, its branch operations, income or expenses may be attributed to branch operations on the basis of internally recorded 'dealings' on the proviso that those records:

  • reflect the functions and assets of the business operations carried on at or through the permanent establishment, and
  • represent the best estimate of branch profits that can be made in the circumstances.

The information collected at some questions in this schedule includes what you have internally recorded as dealings between you and your branch operations, and income/gains you have returned or the expenses/losses you have claimed in respect of those internally recorded dealings.

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