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  • Section G: Taxpayer's declaration

    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

    All foreign countries or jurisdictions not listed in the tables of listed countries and specified countries or jurisdictions are included in the other unlisted country or jurisdiction category.

    Appendix 1: Specified countries or jurisdictions names and codes

    A – C

    D – M

    N – Z

    A – C: Specified countries or jurisdictions names and codes

    Code

    Specified country or jurisdiction

    AND

    Andorra

    AIA

    Anguilla

    ATG

    Antigua and Barbuda

    ABW

    Aruba

    BRB

    Barbados

    BHS

    Bahamas

    BHR

    Bahrain

    BLZ

    Belize

    BMU

    Bermuda

    VGB

    British Virgin Islands

    CYM

    Cayman Islands

    COK

    Cook Islands

    CUW

    Curacao

    CYP

    Cyprus

    D – M: Specified countries or jurisdictions names and codes

    Code

    Specified country or jurisdiction

    DMA

    Dominica

    GIB

    Gibraltar

    GRD

    Grenada

    GGY

    Guernsey

    HKG

    Hong Kong

    IRL

    Ireland

    IMN

    Isle of Man

    JEY

    Jersey

    LBR

    Liberia

    LIE

    Liechtenstein

    LUX

    Luxembourg

    MHL

    Marshall Islands

    MUS

    Mauritius

    MCO

    Monaco

    MSR

    Montserrat

    N – Z: Specified countries or jurisdictions names and codes

    Code

    Specified country or jurisdiction

    NRU

    Nauru

    NLD

    Netherlands

    NIU

    Niue

    PAN

    Panama

    KNA

    Saint Kitts and Nevis

    LCA

    Saint Lucia

    SXM

    Saint Martin (Dutch Part)

    VCT

    Saint Vincent & the Grenadines

    WSM

    Samoa

    SMR

    San Marino

    SYC

    Seychelles

    SGP

    Singapore

    CHE

    Switzerland

    TCA

    Turks and Caicos Islands

    VIR

    US Virgin Islands

    VUT

    Vanuatu

    Appendix 2: Foreign and other jurisdiction names and codes

    A – C

    D – M

    N – Z

    A – C: Specified countries or jurisdictions names and codes

    Code

    Country or jurisdiction

    AFG

    Afghanistan

    ALA

    Aland Islands

    ALB

    Albania

    DZA

    Algeria

    ASM

    American Samoa

    AND

    Andorra

    AGO

    Angola

    AIA

    Anguilla

    ATA

    Antarctica

    ATG

    Antigua and Barbuda

    ARG

    Argentina

    ARM

    Armenia

    ABW

    Aruba

    AUT

    Austria

    AZE

    Azerbaijan

    BHS

    Bahamas

    BHR

    Bahrain

    BGD

    Bangladesh

    BRB

    Barbados

    BLR

    Belarus

    BEL

    Belgium

    BLZ

    Belize

    BEN

    Benin

    BMU

    Bermuda

    BTN

    Bhutan

    BOL

    Bolivia

    BES

    Bonaire, Saint Eustatius and Saba Islands

    BIH

    Bosnia and Herzegovina

    BWA

    Botswana

    BVT

    Bouvet Island

    BRA

    Brazil

    IOT

    British Indian Ocean Territory

    VGB

    British Virgin Islands

    BRN

    Brunei Darussalam

    BGR

    Bulgaria

    BFA

    Burkina Faso

    BDI

    Burundi

    KHM

    Cambodia

    CMR

    Cameroon

    CAN

    Canada

    CPV

    Cape Verde

    CYM

    Cayman Islands

    CAF

    Central African Republic

    TCD

    Chad

    CHL

    Chile

    CHN

    China

    CXR

    Christmas Island

    CCK

    Cocos (Keeling) Islands

    COL

    Colombia

    COM

    Comoros

    COD

    Congo, Democratic Republic of (was Zaire)

    COG

    Congo, People's Republic of

    COK

    Cook Islands

    CRI

    Costa Rica

    CIV

    Côte D'Ivoire (Ivory Coast)

    HRV

    Croatia (Hrvatska)

    CUB

    Cuba

    CUW

    Curacao

    CYP

    Cyprus

    CZE

    Czech Republic

    D – M: Specified countries or jurisdictions names and codes

    Code

    Country or jurisdiction

    DNK

    Denmark

    DJI

    Djibouti

    DMA

    Dominica

    DOM

    Dominican Republic

    TLS

    East Timor (Timor Leste)

    ECU

    Ecuador

    EGY

    Egypt

    SLV

    El Salvador

    GNQ

    Equatorial Guinea

    ERI

    Eritrea

    EST

    Estonia

    ETH

    Ethiopia

    FLK

    Falkland Islands (Malvinas)

    FRO

    Faroe Islands

    FJI

    Fiji

    FIN

    Finland

    FRA

    France

    GUF

    French Guiana

    PYF

    French Polynesia

    ATF

    French Southern Territories

    GAB

    Gabon

    GMB

    Gambia

    GEO

    Georgia

    DEU

    Germany

    GHA

    Ghana

    GIB

    Gibraltar

    GRC

    Greece

    GRL

    Greenland

    GRD

    Grenada

    GLP

    Guadeloupe

    GUM

    Guam

    GTM

    Guatemala

    GGY

    Guernsey

    GIN

    Guinea

    GNB

    Guinea-Bissau

    GUY

    Guyana

    HTI

    Haiti

    HMD

    Heard and McDonald Islands

    VAT

    Holy See (Vatican City State)

    HND

    Honduras

    HKG

    Hong Kong

    HRV

    Hrvatska (Croatia)

    HUN

    Hungary

    ISL

    Iceland

    IND

    India

    IDN

    Indonesia

    IRN

    Iran

    IRQ

    Iraq

    IRL

    Ireland

    IMN

    Isle of Man, The

    ISR

    Israel

    ITA

    Italy

    CIV

    Ivory Coast (Côte D'Ivoire)

    JAM

    Jamaica

    JPN

    Japan

    JEY

    Jersey

    JOR

    Jordan

    KAZ

    Kazakhstan

    KEN

    Kenya

    KIR

    Kiribati

    PRK

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

    KOR

    Korea, Republic of (South Korea)

    KWT

    Kuwait

    KGZ

    Kyrgyzstan

    LAO

    Laos

    LVA

    Latvia

    LBN

    Lebanon

    LSO

    Lesotho

    LBR

    Liberia

    LBY

    Libya

    LIE

    Liechtenstein

    LTU

    Lithuania

    LUX

    Luxembourg

    MAC

    Macau

    MKD

    Macedonia, The Former Yugoslav Republic of

    MDG

    Madagascar

    MWI

    Malawi

    MYS

    Malaysia

    MDV

    Maldives

    MLI

    Mali

    MLT

    Malta

    MHL

    Marshall Islands

    MTQ

    Martinique

    MRT

    Mauritania

    MUS

    Mauritius

    MYT

    Mayotte

    MEX

    Mexico

    FSM

    Micronesia, Federated States of

    MDA

    Moldova

    MCO

    Monaco

    MNG

    Mongolia

    MNE

    Montenegro

    MSR

    Montserrat

    MAR

    Morocco

    MOZ

    Mozambique

    MMR

    Myanmar (was Burma)

    N – Z: Specified countries or jurisdictions names and codes

    Code

    Country or jurisdiction

    NAM

    Namibia

    NRU

    Nauru

    NPL

    Nepal

    NLD

    Netherlands

    NCL

    New Caledonia

    NZL

    New Zealand

    NIC

    Nicaragua

    NER

    Niger

    NGA

    Nigeria

    NIU

    Niue

    NFK

    Norfolk Island

    MNP

    Northern Mariana Islands

    PRK

    North Korea

    NOR

    Norway

    OMN

    Oman

    PAK

    Pakistan

    PLW

    Palau

    PSE

    Palestinian Territory, Occupied

    PAN

    Panama

    PNG

    Papua New Guinea

    PRY

    Paraguay

    PER

    Peru

    PHL

    Philippines

    PCN

    Pitcairn Island

    POL

    Poland

    PRT

    Portugal

    PRI

    Puerto Rico

    QAT

    Qatar

    REU

    Reunion

    ROU

    Romania

    RUS

    Russian Federation

    RWA

    Rwanda

    BLM

    Saint Barthélemy

    SHN

    Saint Helena

    KNA

    Saint Kitts and Nevis

    LCA

    Saint Lucia

    MAF

    Saint Martin (French Part)

    SXM

    Saint Martin (Dutch Part)

    SPM

    Saint Pierre and Miquelon

    VCT

    Saint Vincent and The Grenadines

    WSM

    Samoa

    SMR

    San Marino

    STP

    Sao Tome and Principe

    SAU

    Saudi Arabia

    SEN

    Senegal

    SRB

    Serbia

    SYC

    Seychelles

    SLE

    Sierra Leone

    SGP

    Singapore

    SVK

    Slovakia (Slovak Republic)

    SVN

    Slovenia

    SLB

    Solomon Islands

    SOM

    Somalia

    ZAF

    South Africa

    SGS

    South Georgia and the South Sandwich Islands

    KOR

    South Korea

    SSD

    South Sudan

    ESP

    Spain

    LKA

    Sri Lanka

    SDN

    Sudan

    SUR

    Suriname

    SJM

    Svalbard and Jan Mayen Islands

    SWZ

    Swaziland

    SWE

    Sweden

    CHE

    Switzerland

    SYR

    Syria

    TWN

    Taiwan

    TJK

    Tajikistan

    TZA

    Tanzania

    THA

    Thailand

    TLS

    Timor-Leste (East Timor)

    TGO

    Togo

    TKL

    Tokelau

    TON

    Tonga

    TTO

    Trinidad and Tobago

    TUN

    Tunisia

    TUR

    Turkey

    TKM

    Turkmenistan

    TCA

    Turks and Caicos Islands

    TUV

    Tuvalu

    UGA

    Uganda

    UKR

    Ukraine

    ARE

    United Arab Emirates

    GBR

    United Kingdom

    USA

    United States

    UMI

    United States Minor Outlying Islands

    VIR

    United States Virgin Islands

    URY

    Uruguay

    UZB

    Uzbekistan

    VUT

    Vanuatu

    VAT

    Vatican City State (Holy See)

    VEN

    Venezuela

    VNM

    Vietnam

    WLF

    Wallis and Futuna Islands

    ESH

    Western Sahara

    YEM

    Yemen

    ZMB

    Zambia

    ZWE

    Zimbabwe

    Appendix 3: Listed country names and codes

    Listed country names and codes

    Code

    Listed country

    CAN

    Canada

    FRA

    France

    DEU

    Germany

    JPN

    Japan

    NZL

    New Zealand

    GBR

    United Kingdom of Great Britain and Northern Ireland

    USA

    United States of America

    Appendix 4: Activity codes

    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 or 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 or options)
    • foreign exchange derivative (for example, currency swaps or options)
    • credit derivatives (for example, credit default swaps or options)
    • equity derivatives (for example, equity swaps or warrants)
    • commodity derivatives (for example, commodity swaps or 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 and gains or expenses and 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:

    • expenditure and losses are interchangeable
    • 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 or 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 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, dissemination and distribution of content via:

    • television
    • radio
    • newspapers, journals or magazines (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 and 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 a shopfront or e-commerce website.

    24

    Sales and marketing services

    Sales:

    • commission and 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 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 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).

    Insurance underwriting should be reported under activity code 13 – 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.

    Main pricing methodologies

    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, see Taxation Ruling TR 2004/1 Income 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.

    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.

    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 (for example, 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.

    Derivative codes

    Code

    Type of derivative

    1

    Cross currency interest rate swap

    2

    Currency derivative (not cross currency interest rate swap) including currency swap, forward, future or option

    3

    Fixed for floating interest rate swap (not cross currency)

    4

    Other interest rate derivative (not cross currency)

    5

    Credit default swap

    6

    Commodity derivative including commodity swap, forward, future or option

    7

    Other asset swap

    8

    Other derivative

    Appendix 7: Nature of item codes

    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

    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) & (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) & (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) & (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 PCG 2017/2, use code 7 for the dealings for which you decide to apply the simplified record-keeping option. The simplified record-keeping options available are:

    • Materiality – applicable revenue related dealings
    • Small taxpayers – applicable revenue related dealings
    • Distributors – applicable revenue related dealings
    • Intra group services – applicable services related party dealings
    • Management and administration services – applicable management and administration services related party dealings
    • Technical services – applicable technical services related party dealings
    • Low level loans – applicable inbound international related-party interest-bearing loans and associated expenses

    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?
    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 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 F items 5 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; 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 5, 7, 8 or 11c for which you applied one of the simplified record-keeping options in 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 5 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.

    Percentage of total dollar value

    Code

    Percentage

    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 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.

    Capital asset pricing methodologies

    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 are 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.

    Total dollar value of 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.

    Appendix 12: Transaction types for which foreign exchange gain returned or foreign exchange loss deducted

    Use the following transaction types for reporting of international related party dealings for which you have returned a foreign exchange gain or deducted a foreign exchange loss shown at item 11g.

    The reference in the table to debt interests is to debt interests under Division 974 of the ITAA 1997. For more guidance on what is a debt interest under Division 974, see Guide to the debt and equity tests.

    Transaction types for which foreign exchange gain returned or foreign exchange loss deducted

    Code

    Transaction type

    1

    IRP ordinary borrowings

    2

    IRP ordinary loans

    3

    IRP trade related liabilities

    4

    IRP trade related receivables

    5

    IRP other debt interests issued

    6

    IRP other debt interests acquired

    7

    Other IRP liabilities/payables

    8

    Other IRP assets/receivables

    Appendix 13:Currency codes

    Currency codes for foreign exchange gain returned or foreign exchange loss deducted, or main currency of the notional amount taken to be borrowed under section 160ZZZ

    Currency code

    Currency

    USD

    US Dollar

    EUR

    Euro

    GBP

    British Pound

    JPY

    Japanese Yen

    CNY

    Chinese Yuan Renminbi

    KRW

    South Korean Won

    NZD

    New Zealand Dollar

    AED

    UAE Dirham

    HKD

    Hong Kong Dollar

    CAD

    Canadian Dollar

    MYR

    Malaysian Ringgit

    SEK

    Swedish Krona

    INR

    Indian Rupee

    CHF

    Swiss Franc

    SGD

    Singapore Dollar

    AUD

    Australian Dollar, if functional currency under Subdivision 960-D is not AUD

    Appendix 14: Type of hub

    Hub type codes for offshore dealings subject to the schedules within PCG 2017/1

    Code

    Type of hub

    MKT

    Marketing hub

    SHI

    Shipping hub

    SER

    Services hub

    SAL

    Sales hub

    NCP

    Non-Core procurement hub

    CPR

    Core procurement hub

    Last modified: 06 Nov 2018QC 55230