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Section G: Taxpayer's declaration

Last updated 21 March 2017

If you do not lodge the schedule with your tax return you must sign and date the schedule.

Only applies to schedules lodged in paper form.

Appendices

Appendix 1: Specified countries and codes

Table of specified countries and codes

Specified country

Code

Specified country

Code

Andorra

AND

Liechtenstein

LIE

Anguilla

AIA

Marshall Islands

MHL

Antigua and Barbuda

ATG

Mauritius

MUS

Aruba

ABW

Monaco

MCO

Bahamas

BHS

Montserrat

MSR

Bahrain

BHR

Nauru

NRU

Belize

BLZ

Niue

NIU

Bermuda

BMU

Panama

PAN

British Virgin Islands

VGB

Saint Kitts and Nevis

KNA

Cayman Islands

CYM

Saint Lucia

LCA

Cook Islands

COK

Saint Martin (Dutch Part)

SXM

Curacao

CUW

Saint Vincent & the Grenadines

VCT

Cyprus

CYP

Samoa

WSM

Dominica

DMA

San Marino

SMR

Gibraltar

GIB

Seychelles

SYC

Grenada

GRD

Turks and Caicos Islands

TCA

Guernsey

GGY

US Virgin Islands

VIR

Isle of Man

IMN

Vanuatu

VUT

Jersey

JEY

 

 

Liberia

LBR

 

 

Appendix 2: Country names and codes

Note: Guernsey, Jersey and Isle of Man each have a separate country code.

Table of country names and codes

Country

Code

Country

Code

Afghanistan

AFG

Liberia

LBR

Aland Islands

ALA

Libya

LBY

Albania

ALB

Liechtenstein

LIE

Algeria

DZA

Lithuania

LTU

American Samoa

ASM

Luxembourg

LUX

Andorra

AND

Macau

MAC

Angola

AGO

Macedonia, The Former Yugoslav Republic of

MKD

Anguilla

AIA

Madagascar

MDG

Antarctica

ATA

Malawi

MWI

Antigua and Barbuda

ATG

Malaysia

MYS

Argentina

ARG

Maldives

MDV

Armenia

ARM

Mali

MLI

Aruba

ABW

Malta

MLT

Austria

AUT

Marshall Islands

MHL

Azerbaijan

AZE

Martinique

MTQ

Bahamas

BHS

Mauritania

MRT

Bahrain

BHR

Mauritius

MUS

Bangladesh

BGD

Mayotte

MYT

Barbados

BRB

Mexico

MEX

Belarus

BLR

Micronesia, Federated States of

FSM

Belgium

BEL

Moldova

MDA

Belize

BLZ

Monaco

MCO

Benin

BEN

Mongolia

MNG

Bermuda

BMU

Montenegro

MNE

Bhutan

BTN

Montserrat

MSR

Bolivia

BOL

Morocco

MAR

Bonaire, Saint Eustatius and Saba Islands

BES

Mozambique

MOZ

Bosnia and Herzegovina

BIH

Myanmar (was Burma)

MMR

Botswana

BWA

Namibia

NAM

Bouvet Island

BVT

Nauru

NRU

Brazil

BRA

Nepal

NPL

British Indian Ocean Territory

IOT

Netherlands

NLD

British Virgin Islands

VGB

New Caledonia

NCL

Brunei Darussalam

BRN

New Zealand

NZL

Bulgaria

BGR

Nicaragua

NIC

Burkina Faso

BFA

Niger

NER

Burundi

BDI

Nigeria

NGA

Cambodia

KHM

Niue

NIU

Cameroon

CMR

Norfolk Island

NFK

Canada

CAN

Northern Mariana Islands

MNP

Cape Verde

CPV

North Korea

PRK

Cayman Islands

CYM

Norway

NOR

Central African Republic

CAF

Oman

OMN

Chad

TCD

Pakistan

PAK

Chile

CHL

Palau

PLW

China

CHN

Palestinian Territories

PSE

Christmas Island

CXR

Panama

PAN

Cocos (Keeling) Islands

CCK

Papua New Guinea

PNG

Colombia

COL

Paraguay

PRY

Comoros

COM

Peru

PER

Congo, Democratic Republic of (was Zaire)

COD

Philippines

PHL

Congo, People's Republic of

COG

Pitcairn Island

PCN

Cook Islands

COK

Poland

POL

Costa Rica

CRI

Portugal

PRT

Côte D'Ivoire (Ivory Coast)

CIV

Puerto Rico

PRI

Croatia (Hrvatska)

HRV

Qatar

QAT

Cuba

CUB

Reunion

REU

Curacao

CUW

Romania

ROU

Cyprus

CYP

Russian Federation

RUS

Czech Republic

CZE

Rwanda

RWA

Denmark

DNK

Saint Barthélemy

BLM

Djibouti

DJI

Saint Helena

SHN

Dominica

DMA

Saint Kitts and Nevis

KNA

Dominican Republic

DOM

Saint Lucia

LCA

East Timor (Timor Leste)

TLS

Saint Martin (French Part)

MAF

Ecuador

ECU

Saint Martin (Dutch Part)

SXM

Egypt

EGY

Saint Pierre and Miquelon

SPM

El Salvador

SLV

Saint Vincent and The Grenadines

VCT

Equatorial Guinea

GNQ

Samoa

WSM

Eritrea

ERI

San Marino

SMR

Estonia

EST

Sao Tome and Principe

STP

Ethiopia

ETH

Saudi Arabia

SAU

Falkland Islands (Malvinas)

FLK

Senegal

SEN

Faroe Islands

FRO

Serbia

SRB

Fiji

FJI

Seychelles

SYC

Finland

FIN

Sierra Leone

SLE

France

FRA

Singapore

SGP

French Guiana

GUF

Slovakia (Slovak Republic)

SVK

French Polynesia

PYF

Slovenia

SVN

French Southern Territories

ATF

Solomon Islands

SLB

Gabon

GAB

Somalia

SOM

Gambia

GMB

South Africa

ZAF

Georgia

GEO

South Georgia and the South Sandwich Islands

SGS

Germany

DEU

South Korea

KOR

Ghana

GHA

South Sudan

SSD

Gibraltar

GIB

Spain

ESP

Greece

GRC

Sri Lanka

LKA

Greenland

GRL

Sudan

SDN

Grenada

GRD

Suriname

SUR

Guadeloupe

GLP

Svalbard and Jan Mayen Islands

SJM

Guam

GUM

Swaziland

SWZ

Guatemala

GTM

Sweden

SWE

Guernsey

GGY

Switzerland

CHE

Guinea

GIN

Syria

SYR

Guinea-Bissau

GNB

Taiwan

TWN

Guyana

GUY

Tajikistan

TJK

Haiti

HTI

Tanzania

TZA

Heard and McDonald Islands

HMD

Thailand

THA

Holy See (Vatican City State)

VAT

Timor-Leste (East Timor)

TLS

Honduras

HND

Togo

TGO

Hong Kong

HKG

Tokelau

TKL

Hrvatska (Croatia)

HRV

Tonga

TON

Hungary

HUN

Trinidad and Tobago

TTO

Iceland

ISL

Tunisia

TUN

India

IND

Turkey

TUR

Indonesia

IDN

Turkmenistan

TKM

Iran

IRN

Turks and Caicos Islands

TCA

Iraq

IRQ

Tuvalu

TUV

Ireland

IRL

Uganda

UGA

Isle of Man, The

IMN

Ukraine

UKR

Israel

ISR

United Arab Emirates

ARE

Italy

ITA

United Kingdom

GBR

Ivory Coast (Côte D'Ivoire)

CIV

United States

USA

Jamaica

JAM

United States Minor Outlying Islands

UMI

Japan

JPN

United States Virgin Islands

VIR

Jersey

JEY

Uruguay

URY

Jordan

JOR

Uzbekistan

UZB

Kazakhstan

KAZ

Vanuatu

VUT

Kenya

KEN

Vatican City State (Holy See)

VAT

Kiribati

KIR

Venezuela

VEN

Korea, Democratic People's Republic of (North Korea)

PRK

Vietnam

VNM

Korea, Republic of (South Korea)

KOR

Wallis and Futuna Islands

WLF

Kuwait

KWT

Western Sahara

ESH

Kyrgyzstan

KGZ

Yemen

YEM

Laos

LAO

Zambia

ZMB

Latvia

LVA

Zimbabwe

ZWE

Lebanon

LBN

 

 

Lesotho

LSO

 

 

Appendix 3: Listed country names and codes

Listed country names and codes

Listed country

Code

Canada

CAN

France

FRA

Germany

DEU

Japan

JPN

New Zealand

NZL

United Kingdom of Great Britain and Northern Ireland

GBR

United States of America

USA

Appendix 4: Activity codes

Table of activity codes

Activity
code

Activity code description

1

Administrative services

Activities that relate to an entity's operations but excluding activities relating to financing and production. These activities include:

  • management services
  • back office services
  • administrative services associated with recharge amounts
  • accounting services
  • IT support services
  • human Resources
  • legal
  • accounting.

 

2

Advisory services

Activities involving the provision and receipt of professional advice where a fee is paid for the advice, including:

  • consultancy activities
  • investment advice
  • legal advice.

 

3

Asset management

Activities associated with the management of assets/ funds/ investments. This will be undertaken on a discretionary basis in accordance with an investment strategy, with the entity responsible for:

  • acquiring, monitoring, managing and disposing of traditional and alternate financial products held by the taxpayer or a related party
  • assessing, monitoring and managing the market risks associated with holding these financial products.

 

4

Borrowing and lending

Activities involving the generation of internal and external funding.

5

Brokerage

Activities involving the mediation between a buyer and a seller, occurring in a range of products, including:

  • mortgages, where brokers act as intermediaries to sell mortgage loans on behalf of individuals or businesses
  • commodities, where brokers execute orders to buy or sell commodity contracts on behalf of clients
  • investment, where brokers act as intermediaries between investment buyers and sellers.

 

6

Cash & trade services

Activities involving the facilitation of fund transfers and the exchange of goods and services, including:

  • cash management systems (payment processing systems)
  • foreign exchange clearing services
  • trade settlements
  • letters of credit (trade, insurance and export).

 

7

Construction

All construction activities including residential and commercial construction and the construction of utilities and infrastructure.

8

Custody and transaction clearing services

Custody is all activities that are associated with the safekeeping of securities for customers, also includes the collection of dividends, interest and proceeds from securities sales.

Transaction clearing are all activities associated with the management of post-trading, pre-settlement credit exposures, to ensure that trades are settled in accordance with market rules, including:

  • reporting and monitoring
  • risk margining
  • netting of trades to single positions.

 

9

Derivatives

Activities undertaken in respect of derivatives (a financial instrument derived from some other asset, index, event, value or condition). The overall derivatives market has five major classes of underlying asset:

  • interest rate derivatives (for example, interest rate swaps/options)
  • foreign exchange derivative (for example, currency swaps/options)
  • credit derivatives (for example, credit default swaps/options)
  • equity derivatives (for example, equity swaps/ warrants)
  • commodity derivatives (for example, commodity swaps/gold options).

 

10

Distribution and sale of goods

Goods purchased by a distributor from an international related party.

11

Financing activities

Activities involving dealings in financial instruments that would qualify as financial assets or financial liabilities under relevant Australian accounting standards or comparable foreign accounting standards but excludes financial instruments that would meet the definition of a derivative. At the time of this publication, the two key Australian accounting standards relevant to this question include:

  • AASB 132 Financial Instruments: Presentation
  • AASB 139 Financial Instruments: Recognition and Measurement.

The relevant amounts may be reported in the financial statements as revenue/gains or expenses/losses, depending on the accounting treatment of your relevant financial assets and financial liabilities (this includes amounts relating to hedging items that are classified in the financial statements as financial assets or financial liabilities). Therefore, for the purposes of this activity code, the terms ‘expenditure’ and ‘losses’ are interchangeable and the terms ‘revenue’ and ‘gains’ are interchangeable.

12

Guarantees

Activities associated with contracts under which a party agrees to perform an obligation or discharge a liability of another entity should that entity fail to do so.

13

Insurance and reinsurance

Insurance and reinsurance activities include general insurance, life insurance and health insurance.

14

Leasing

Activities that relate to agreement between two parties under which one is granted the right to use the property of the other for a specified period of time in return for a series of payments by the user to the owner.

15

Licensing or transfer of intellectual property

Activities involving an intellectual property rights owner (licensor) and another entity which is given authorisation to use these rights (licensee) in exchange for an agreed payment (fee or royalty). This includes activities involving:

  • technology license agreements
  • trademark licensing agreements
  • copyright license agreements
  • trademark license agreements
  • franchise agreements
  • sales/purchase of IP.

 

16

Logistics

Activities associated with the managing of a commercial organisation’s supply chain that supports the sourcing, timing and movement of goods and/or services, including:

  • shipping
  • transport
  • storage
  • procurement and sourcing
  • freight
  • scheduling.

 

17

Manufacturing and sale of goods

Activities involved in the sale of goods created by a manufacturing process (excluding agriculture).

18

Media, telecommunications and information services

With regard to media and information services, activities associated with the creation, collation and dissemination/distribution of content via:

  • television
  • radio
  • newspapers/journals/magazines (both hardcopy and equivalent electronic versions)
  • books (both hardcopy and equivalent electronic versions)
  • CD and DVD
  • internet
  • other information and communication channels.

With relation to Telecommunications, activities associated with the operation, management, maintenance and sale of access to telecommunications infrastructure and networks including:

  • telephony
  • fax or data
  • digital cable/satellite television
  • internet.

 

19

Primary production/extraction and sale of goods

Activities involved in the sale of physical products that have resulted from:

  • the growing of crops, raising of animals, growing and harvesting of timber
  • the extraction of naturally occurring mineral solids, such as coal and ores; liquid minerals, such as crude petroleum; and gases, such as natural gas.

 

20

Purchase and distribution of goods

Goods sold by a distributor to an international related party.

21

Purchase and manufacture of goods

Activities associated with the purchase of goods to be used in a manufacturing process (excluding agriculture).

22

Receipt/payment of dividends and distributions from trusts and partnerships

23

Retail trade

Activities associated with the retail trade of all goods classifications to end customers through an e-commerce website.

24

Sales and marketing services

Sales:

  • commission/amounts received or paid in respect of the provision of services to facilitate the sale of goods or services
  • amounts received or paid in respect of transaction, investment and information services carried out on behalf of customers relating to the customer’s securities, financial assets, financial liabilities, portfolios and/or other assets.

Marketing:

  • activities that involve acquiring new customers or businesses and maintaining a relationship with them, including
  • advertising
  • brand promotion
  • sales strategies
  • customer support services.

 

25

Securitisation services

Activities involving the packaging of an income by the party entitled to it and the subsequent sale of such income stream to investors.

26

Software and information technology services

Activities involved in the support and maintenance of software and technology used by the taxpayer. Activities relating to the ownership of the software and technology are excluded, such as leasing and rental fees.

27

Superannuation

Activities associated with providing, funding or offering investment strategies for financial security upon retirement.

28

Technical services

Activities involving:

  • engineering
  • project management
  • R&D
  • exploration.

 

29

Toll manufacturing services

Activities involved with the provision of manufacturing services for a fee or price per unit payment, where the manufacturing entity does not take legal title to the inventory or finished goods.

30

Treasury related services

Activities involved in the managing of the taxpayer's financial operations, including:

  • transaction, investment and information services relating to securities, financial assets, financial liabilities, portfolios and/or other assets held by yourself or an international related party
  • risk management systems development and review
  • the management of currencies and cash flows
  • complex strategies, policies and procedures relating to the taxpayer finance.

 

31

Underwriting services

Activities involves measuring risk exposure and determining the premium that needs to be charged to insure that risk, including:

  • securities underwriting (underwriter assumes risk in bringing the issue to market by guaranteeing the issuer will receive a certain price when the offering is sold to investors)
  • bank underwriting (underwriting is the detailed credit analysis preceding the granting of a loan, based on credit information furnished by the borrower).

Note: Insurance underwriting should be reported under activity code 9 – insurance and reinsurance.

32

Utilities and infrastructure

Activities associated with the operation and management of utilities (for example, electricity, gas, water, sewerage) and infrastructure (for example, roads, rail, airports, sea ports).

99

Other

All other activities not listed above.

Appendix 5: Main pricing methodologies

The arm's length pricing methodologies should be identified using the codes listed below.

Code

Arm's length pricing method

1

Apportionment of costs

This pricing method apportions the costs associated with a controlled transaction among the associated enterprises. However, cases may arise where neither comparable dealings nor data are available to apply to traditional, or profit-based, methods. In these instances, application of an indirect method such as apportionment of costs on the basis of a formula may be applicable.

2

Apportionment of income

This pricing method apportions the income associated with a controlled transaction among the associated enterprises.

As with code 1, this method may be appropriate where there are neither comparable dealings nor data to apply the traditional, or profit-based, methods to the pricing problem.

3

Comparable uncontrolled price method

This traditional transfer pricing method compares the price for property or services transferred in a controlled transaction, that is, with a related international party, to the price that is charged for comparable property or services under the same or similar circumstances in an uncontrolled transaction.

Where it is possible to locate comparable uncontrolled transactions, the comparable uncontrolled price method is the most direct and reliable way to apply the arm's length principle. If there is any difference between the prices or the terms or nature of the controlled transaction and the uncontrolled transaction, this may indicate that the dealings of the associated enterprises are not arm's length.

Note that intangible and intellectual property transactions present particular problems with regard to comparability, especially where such property is unique or specialised.

If you use this method but the comparable uncontrolled price is adjusted to allow for particular circumstances of the controlled dealing, you should still record the adjusted price under this code.

4

Cost-contribution arrangement

A cost-contribution arrangement is one where members of a multinational group act in concert for the benefit of each of the participants to:

  • produce or provide goods, intangible property or services
  • acquire these jointly from a third party
  • agree to share the actual costs and risks undertaken.

Each participant bears a fair share of the costs and is entitled to receive a fair share of rewards. The concept is akin to a joint venture or partnership.

To be consistent with the arm's length principle, the contributors must be satisfied that they can obtain an acceptable rate of return within a timeframe that takes into account their financial and business circumstances.

For more information refer to Taxation Ruling TR 2004/1Income tax: international transfer pricing – cost contribution arrangements.

5

Cost-plus method

This is a traditional transfer pricing methodology. The cost-plus method begins with the costs incurred by the supplier of property or services in a controlled transaction for property transferred or services provided to a related purchaser. An appropriate arm's length cost-plus mark-up is then added to this cost to make an appropriate profit in light of the functions performed and the market conditions. What is arrived at after adding the arm's length cost-plus mark-up to the above costs may be regarded as an arm's length price of the original controlled transaction.

This method is probably most useful if:

  • semi-finished goods that are subject to additional manufacturing or assembly are sold between related parties
  • related parties have concluded joint facility agreements or long-term buy-and-supply arrangements
  • the controlled transaction is the provision of services.

This method is not suited for high value intangibles.

Further analysis can be undertaken by reviewing the cost plus mark-up of the supplier in the controlled transaction. This is done by referencing the cost plus mark-up that the same supplier earns in comparable uncontrolled transactions. The cost plus mark-up that would have been earned in comparable transactions by an independent enterprise may serve as guidance.

If a fixed percentage mark-up is applied to the relevant cost base without any benchmarking of that percentage against comparable independent dealings, it is not regarded as cost-plus method.

6

Fixed mark-up applied to cost

This method determines the transfer price for a controlled transaction by applying a fixed percentage mark-up to a relevant cost base where the mark-up is not benchmarked against comparable independent dealings. The absence of benchmarking distinguishes this method from the cost-plus method discussed at code 5.

Note:

The 'fixed mark-up applied to cost' code should be used as described by TR 1999/1 Income tax: international transfer pricing for intra-group services has been utilised to set the pricing of intra group services.

7

Fixed percentage of resale price

This pricing method determines the transfer price for a controlled transaction as a fixed percentage of the resale price, where the fixed percentage chosen is not benchmarked against the gross margins earned in comparable independent dealings.

The absence of benchmarking distinguishes this method from the resale price method, code 10.

Note: The 'fixed percentage of resale price' methodology code should be used as described by TR 1999/1 Income tax: international transfer pricing for intra-group services has been utilised to set the pricing of intra group services.

8

Marginal costing

Marginal costing applies only the variable production costs to the costs of a product. This method is often used by companies and multinational enterprise groups for internal cost accounting and management control purposes. Its use in setting transfer prices on international dealings between associated enterprises for tax purposes is acceptable only if pricing on the basis of marginal costs represents an arm's length outcome for the transfer of goods or services into the particular market.

9

Profit split method

This is a transactional profit methodology. The profit split method determines the appropriate pricing for transactions by:

  • identifying the combined profit or loss from the dealings between the related parties
  • splitting that combined profit or loss between the related parties.

The split of profit or loss between the parties must be made on an economically valid basis that approximates the division of profits in an agreement made at arm's length.

10

Resale price method

This traditional transfer pricing method may be appropriate where an enterprise sells a product to a related party who then resells that product to an independent third party.

The resale price is reduced by the arm's length resale price margin and may then be regarded after adjustments for other costs associated with the original purchase of the product as an arm's length price of the original transfer of property between the related parties.

Further analysis can be undertaken by reviewing the resale price margin of the reseller in the controlled transaction. This is done by referencing the resale price margin that the same reseller earns on items purchased and sold in comparable uncontrolled transactions. The resale price margin earned by an independent enterprise in comparable uncontrolled transactions may also provide guidance.

Margins are usually measured at gross profit level, however a comparison undertaken at an intermediate level may be more accurate. A comparison at the net profit level falls under a different methodology - the transactional net margin method.

The resale price margin will vary depending on the value added by the reseller. Variables such as functions performed, economic circumstances, assets employed, and risks undertaken should reflect higher margins.

11

Transactional net margin method

This is a transactional profit methodology. The transactional net margin pricing method is based on comparisons made at the net profit level between the taxpayer and independent parties in relation to a comparable transaction or dealing. It examines the net profit margin relative to an appropriate base (e.g. costs, sales or assets) that a taxpayer realises from a controlled transaction.

Comparisons at the net profit level can be made on a single transaction or in relation to some aggregation of dealings between associated enterprises.

12

Transactional net margin method (whole-of-entity)

The transactional net margin method is discussed at code 11. If after exercising commercial judgement you have decided to aggregate and test the arm’s length nature of multiple international related party dealings through the application of the transactional net margin method on a whole-of-entity basis, then use code 12 as the main pricing methodology.

See Appendix 9 for when to use ‘Transactional net margin method (whole-of-entity)’ methodology.

13

Other arm's length methods

Use code 13 if your arm's length method is not represented by codes 1 to 12.

14

No transfer pricing method used

Use code 14 if no principal transfer pricing method has been used.

Appendix 6: Derivative codes

The type of derivative should be identified using the codes listed below.

Code

Type of derivative

1

Credit default swaps

2

Currency swaps

3

Forwards

4

Interest rate swaps

5

Options

6

Swaps – other

7

Warrant

8

Other

Cross currency interest rate swap transactions are to be included under the code for currency swaps.

Appendix 7: Nature of item codes

Table of nature of item codes

Item code

Item code description

1

Company shares

2

Contract manufacturing

3

Contractual interests

4

Deposits/investment assets

5

Derivative portfolio

6

Insurance policies

7

Insurance recapitalisation

8

Intellectual property/intangibles

9

Interests in trust, partnership or other entity type

10

Loan assets

11

Loan liabilities

12

Marketing hubs

13

Real property

14

Shared services

15

Shipping

16

Trading activities

17

Other assets

18

Other functions

19

Other liabilities

20

Other risks

Where you believe that more than one item code may apply, use the most appropriate code.

The terms used in these codes should be interpreted in accordance with their ordinary meaning as used in the context of the industry to which the term relates.

Appendix 8: Transferor trust exemption codes

Table of transferor trust exemption codes

Code

Subsection/section

1

102AAT(1)(a)(i)(A) to (D)

The transfer was:

  • made to a non-resident discretionary trust
  • an arm's length transaction undertaken in the ordinary course of business.

 

2

102AAT(1)(a)(i)(A) to (C) and (E)

The transfer was:

  • made to a non-resident discretionary trust
  • an arm's length transaction not undertaken in the ordinary course of business
  • neither the transferor nor its associates were in a position to control the trust (from the time of the transfer until the end of the transferor's current year of income).

 

3

102AAT(1)(a)(i)(A) to (C) and (F)

The transfer was:

  • made to a non-resident discretionary trust
  • made either on or before 12 April 1989
  • neither the transferor nor its associates were in a position to control the trust (from 12 April 1989 until the transferor's current year of income).

This exemption will not apply to transfers made in the last three income years.

4

102AAT(1)(a)(ii)(A) to (C)

The transfer was:

  • made to a non-resident non-discretionary trust
  • made either on or after 12 April 1989
  • for a consideration equal to or greater than the arm's length amount.

 

5

102AAT(1)(a)(ii)(A), (B) and (D)

The transfer was:

  • made to a public unit trust (that is a non-resident trust estate)
  • made either on or after 12 April 1989
  • for a consideration equal to or greater than the arm's length amount
  • the sole purpose of the transaction was the arm's length acquisition of units in a public unit trust.

 

6

102AAZE

De minimis exemption

The transfer was made to a non-resident trust that is a resident of a listed country and the total of the attributable incomes of all non-resident trust estates is equal to or less than the lesser of either:

  • $20,000
  • 10% of the total of the net incomes of the trust estates.

 

Appendix 9: Percentage of dealings with documentation

'Percentage of dealings with documentation' refers to the aggregate dollar amount of transactions reported at specific questions in the schedule for which you have relevant documentation expressed as a percentage of total dollar value of transactions reported at each specific question.

If your relevant related party dealings meet the conditions for one of the simplified record keeping options in the PCG 2017/2, you should use code 7 for the dealings for which you decide to apply the simplified record-keeping option. The simplified record-keeping options available are:

  • Small taxpayers – applicable revenue related dealings
  • Distributors – applicable revenue related dealings
  • Intra group services – applicable services related party dealings
  • Low level loans – applicable interest bearing loans and associated interest dealings

Transfer pricing documentation

For income years commencing on or after 29 June 2013, section  284-250 of Schedule 1 to the Taxation Administration Act 1953 provides that a particular way of applying Subdivision 815-B of the ITAA 1997 is not reasonably arguable for the purpose of applying Division 284 of Schedule 1 to the Taxation Administration Act 1953 (concerning administrative penalties) unless the entity meets the documentation requirements in section 284-255.

In order for the documentation requirements in section 284-255 to be met, certain factual matters set out in subsection 284-255(2) must be readily ascertained from records that meet the requirements of subsection 284-255(1).

TR 2014/8 sets out our views on the documentation requirements in section 284-255.

It is recommended at paragraphs 80 to 121 of TR 2014/8 that the following five key questions be considered when documenting your transfer pricing treatment in light of your facts and circumstances:

  1. What are the actual conditions that are relevant to the matter (or matters)?
  2. What are the comparable circumstances relevant to identifying the arm's length conditions?
  3. What are the particulars of the methods used to identify the arm's length conditions?
  4. What are the arm's length conditions and is/was the transfer pricing treatment appropriate?
  5. Have any material changes and updates been identified and documented?

If you meet the documentation requirements of Subdivision 284-E you may lessen the likelihood of the ATO conducting a transfer pricing review.

The selection of arm's length pricing methods for your related-party international dealings is discussed in TR 98/11.

Contemporaneous documentation

Documentation is contemporaneous if:

  • it is existing or brought into existence either:          
    • at the time you are developing or implementing any arrangement that might raise transfer pricing issues
    • when you are reviewing these arrangements prior to or at the time of the preparation of tax returns
     
  • the documentation records information relevant to determining the arm’s length conditions for the purpose of applying Division 815 of the ITAA 1997.

The documentation may be in the form of books, records, studies, budgets, plans and projections, analyses, conclusions and other material that record the information. It may be in electronic or written form.

The initial analysis of your international dealings for the purpose of determining the arm's length conditions for those dealings will have been carried out and documented at the time of engaging in the dealings. To review those international dealings before you prepare your tax returns is prudent business practice.

To determine the code for the percentage of your dealings with international related parties

At items to 13 and 17 write the relevant code from the table below for

  • the percentage of your dealings with international related parties for which you have the relevant written documentation – please note that it is not a requirement for the purposes of selecting the code that relevant written documentation meets all the requirements of Subdivision 284-E of Schedule 1 to the Taxation Administration Act 1953; or
  • code 7 for your dealings shown at items 578 or 11c for which you applied one of the simplified record-keeping options in the PCG 2017/2.

If after exercising commercial judgement you have decided to aggregate and test multiple international related party dealings through the application of the transactional net margin method on a whole-of-entity basis, then do both of the following:

  • write code 12 at E to show ‘transactional net margin method on a whole-of-entity’ as the main pricing methodology.
  • write the applicable code from the table below at label F to indicate the percentage of dealings with documentation for questions to 13, and 17.

If, in exercising your commercial judgement you decide not to apply a whole of entity transactional net margin method analysis, you should test and document your international related party dealings separately and use one of the codes from the table below to show the percentage of the total of the dollar value for which you have documentation.

Code

Percentage of the total of the dollar value for which you have documentation

1

0%

2

1% to less than 25%

3

25% to less than 50%

4

50% to less than 75%

5

75% to less than 100%

6

100%

7

Applied simplified record keeping option in the PCG 2017/2

You may calculate the percentage on the basis of a reasonable estimate.

A statistical sample may be an appropriate method of calculating the relevant percentage, provided the sample selection and mathematical consideration are consistent with generally accepted statistical methods.

Keep your working papers if you have used a sampling process to make this estimate.

Appendix 10: Capital asset pricing methodologies

The capital asset pricing methodologies should be identified using the codes listed below.

Code

Pricing method

1

Cost price

2

Directors valuation

3

Discounted cash flow

4

Independent valuation

5

Nil consideration

6

Quoted market price

7

Written-down value

8

Other methods

Cost price is the price the seller originally paid for the asset, including ancillary costs such as freight or handling.

Written-down value is a pricing method based on either the taxation 'adjustable value' or accounting residual value after depreciation has been allowed.

Discounted cash flow is a pricing method where the price of an asset is based on the discounted cash flow at the time of acquisition or disposal.

Director's valuation is a pricing method that is based on the directors' opinion of an asset's value, and not on any of the other methods listed in codes 1 to 8.

Independent valuation is a pricing method by which a suitably qualified person, acting at arm's length to both the buyer and seller, assesses the value of an asset.

Quoted market price is a price quoted on a public listed market, such as a public stock exchange, or commodities market.

Other methods means any other pricing method that is not mentioned in Appendix 5.

The above pricing methods may not provide an arm's length price under all circumstances. The above examples are not an exhaustive list.

Appendix 11: Capital value of a restructure

Use one of the following numeric codes to state the total of the dollar value of the restructure.

Code

Range

1

$0 to less than $10 million

2

$10 million to less than $50 million

3

$50 million to less than $100 million

4

$100 million to less than $500 million

5

$500 million or greater

The dollar amounts or values asked for in this question are all based on your existing accounting records. 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. Keep your working papers if you have made a reasonable determination.

QC45337