Show download pdf controls
  • Question 3

    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.

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

    Only dealings conducted on your own behalf need to be taken into account in the answer to this question. Do not include dealings on behalf of your clients.

    Example

    A financial services entity enters into a currency swap with its related foreign subsidiary on behalf of its customer. The entity does not include at this question the amounts directly payable or receivable under the swap because it has not entered into the swap with its foreign subsidiary on its own behalf.

    However, any service fee or amount receivable by the entity from their foreign subsidiary in connection with the transaction (for example, an arrangement fee) would be an international related party dealing that the entity would include in its answer to this question.

    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 derivatives you may report revenue/expenses from net cash flows and/or you may report a gain/loss in fair value). Therefore for the purposes of this question, the terms 'expenditure' and 'losses' are interchangeable and the terms 'revenue' and 'gains' are interchangeable.

    For more information about how to determine the amounts to be included in respect of derivatives, refer to the instructions for question 9.

    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 (the total amount of expenses/losses plus the total amount of 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
    • in respect of the three countries with the highest dollar value of international related party dealings, group the dealings in each of the countries according to activity type
    • total the dollar value of your dealings (expenses/losses plus revenue/gains, excluding principal and principal repayment amounts) for each activity type
    • calculate the three activity types with the highest dollar value for each of the three countries.

    If you had international related party dealings during the income year, disregarding your dealings with parties located in any of the specified countries listed in Appendix 1, answer 'Yes' at label A of question 3 and complete the required label fields.

    At labels B, H and N, write the Appendix 2 codes for the three countries with the highest dollar value in respect of your dealings with international related parties located in countries apart from specified countries. Write these codes in descending order of total dollar value.

    At labels C, I and O, write the Appendix 4 codes for the three activity types with the highest dollar value of international related party dealings in relation to each of the countries you have identified. Write these codes in descending order of total dollar value.

    At labels D, J and P, write the total amount of expenditure/losses incurred (excluding principal and principal repayment amounts) in respect of each activity type you have identified in relation to the relevant country identified.

    At labels E, K and Q, write the total amount of revenue/gains earned (excluding principal and principal repayment amounts) in respect of each activity type you have identified in relation to the relevant country identified.

    At labels F, L and R, write the total of all other amounts of expenditure/losses for international related party dealings for the relevant country identified.

    At labels G, M and S, write the total of all other amounts of revenue/gains for international related party dealings for the relevant country identified.

    Further Information

    For the list of:

    End of further information

    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

    Canada

    100% subsidiary

    Management services

    1

    1,360,000

    4,000,000

    5,360,000

    Canada

    100% subsidiary

    Guarantees

    12

     

    870,000

    870,000

    Egypt

    100% subsidiary

    Advisory services

    2

     

    400,000

    400,000

    Egypt

    100% subsidiary

    Loan

    4

    3,666,000

    4,330,000

    7,996,000

    Egypt

    95% subsidiary

    Leasing

    14

    280,000

    300,000

    580,000

    Egypt

    100% subsidiary

    Technical services

    28

     

    295,000

    295,000

    France

    100% subsidiary

    Advisory services

    2

     

    500,000

    500,000

    France

    na

    Derivatives

    9

    4,580,000

    4,450,000

    9,030,000

    Japan

    100% subsidiary

    Loan

    4

    6,320,000

    4,100,000

    10,420,000

    Vietnam

    100% subsidiary

    Derivatives

    9

    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

    Canada

    1,360,000

    4,870,000

    6,230,000

    Egypt

    3,946,000

    5,325,000

    9,271,000

    France

     

    500,000

    500,000

    Japan

    6,320,000

    4,100,000

    10,420,000

    Vietnam

    6,300,000

    4,050,000

    10,350,000

    Attention

    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.

    End of attention

    The Australian taxpayer will:

    • record that the highest value of related party dealings are for Japan
    • complete the first row for the first country (Japan) recording the relevant information in respect of the loan dealings with Japan
    • leave blank the remaining fields relating to the first country indicating they did not have any other kinds of related party dealings for Japan
    • record that the second highest value of related party dealings are for Vietnam
    • complete the first two rows for the second country (Vietnam) recording the relevant information in respect of the two different kinds of their related party dealings for Vietnam - derivatives and other services
    • leave blank the remaining fields relating to the second country, indicating they did not have any other kinds of related party dealings for Vietnam
    • record that the third highest value of related party dealings are for Egypt
    • complete the three rows for the third country (Egypt) recording the relevant information in respect of the two different kinds of their related party dealings - loan, leasing and advisory services
    • complete label S in the fourth row for 'All other amounts' for Egypt, recording the revenue earned for technical services.
     

    With this information the Australian taxpayer completes question 3 as follows:

    With this information the Australian taxpayer completes question 3

    Last modified: 08 Aug 2014QC 26054