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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

    This question seeks to identify significant restructures undertaken between Australian taxpayers and international related parties or your branch operations. For the purposes of this question we have adopted a wide meaning of the term 'restructuring' which goes beyond the generally accepted financial definition.

    'Restructuring events' for the purposes of this question, consistent with the definition in TR 2011/1, refers to arrangements whereby assets, functions and/or risks of a business are transferred between you and international related parties, or your branch operations. 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 or the significant modification of service arrangements between yourself and international related parties (for example, this may include transfer of agency, distribution, finance, information technology, insurance, logistics, marketing, sales, shared services, shipping, trading, transport and treasury functions)
      • the transfer of risks between yourself and international related parties
      • the increase or decrease of rights or obligations
       
    • 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.

    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 also collects information about restructures involving your branch operations. Aspects of these restructures may be reflected in internally recorded 'dealings' with your branch that record the attribution of your income and expenditure to the branch operations. For more information, see the Introduction of these instructions.

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

    We recognise that this question asks you to determine a value for each restructure, 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. We do not expect you to obtain a formal valuation for this purpose.

    For the purpose of this question the most material restructuring events aggregates two elements:

    • The capital value of each restructure. This will be the value of the restructure shown at label D in question 17a and should be the aggregated value of the restructure in terms of acquiring or disposing of assets, liabilities, functions, risks, rights or obligations.
    • The gross impact on transactions reflected in your income and expenditure for international related party dealings, including in the next five years, resulting from each restructure.

    To complete this question you need to:

    • disregard all restructures where there is no international related party or branch operation involvement
    • determine the three most material restructure events.

    If during the income year you had restructuring event(s) involving international related parties or branch operations, answer 'Yes' at label A of this question and for the three most material restructure events complete the required fields at item 17a.

    At item 17a:

    • At label C, identify the principal international related party involved in each of the three restructures and select branch 'B' or entity 'E'. for the type of related party involved in the restructure.
    • At label D, select the code at Appendix 11 which indicates the relevant capital value of each of the three restructures listed,
    • At label E, write the Appendix 7 code that best describes the nature of the relevant restructure in terms of the asset, liability, function, risk, right or obligation.
    • At label G, specify the code of the country in which the principal international related party to the relevant restructure was located, or the foreign country relevant to your branch operations.
    • At label F, identify the code for the percentage of dealings for which you have documentation. 'Percentage of dealings with documentation' refers to the aggregate dollar amount of the capital value of each restructure reported at this question for which you have relevant documentation (as per TR 98/11) expressed as a percentage of the total dollar amount of the capital value of each restructure reported at this question.
    • At label H, write a brief description of the main elements of the relevant restructure; the description should include both the initial transfer of assets, liabilities, functions, risks, rights or obligations and the resulting change in international related party dealings, including in future years. In the example below, the description could be 'ceased New Zealand branch operations, dealing in derivative contracts continued with other world wide associates'. The description should be limited to 200 characters.
    • At label I, indicate if there was a contemporaneous, professional valuation study or transfer pricing analysis of the relevant restructuring event undertaken. 'Transfer pricing analysis' refers to transfer pricing documentation prepared in accordance with the guidance provided in TR 98/11.

    At item 17b, answer 'Yes' if during the last three income years (including the current income year) you revalued any assets following a restructuring event involving international related parties or your branch operations.

    Further Information

    For the list of:

    End of further information

    Example

    During the income year an Australian resident taxpayer shut down its New Zealand branch operations. This included ceasing to carry on trading in derivative contracts through its New Zealand branch operations. However, the taxpayer continued to carry on trading in those derivative contracts other than through its New Zealand 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

    New Zealand branch

    Yes

    Australian entity (excluding New Zealand branch operations)

    Yes

    400,000,000

    New Zealand building

    New Zealand branch

    Yes

    Jersey subsidiary

    Yes

    45,000,000

    Furniture and equipment

    New Zealand branch

    Yes

    New Zealand entity

    No

    21,000,000

    Total

    466,000,000

    In this example there are several relevant events involved in closing the New Zealand 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 taxpayer has documentation covering 70% of this transaction.

    The Australian taxpayer completes question 17 as follows:

    The Australian taxpayer completes question 17

    Last modified: 08 Aug 2014QC 26054