ato logo
Search Suggestion:

Item 1

Last updated 27 September 2012

Item 1 asks for details and total values of the three main business activities carried out with international related parties, and the three principal foreign locations for each. If you had fewer than three different, relevant kinds of business activities with international related parties, or dealings in fewer than three locations, list those that you had.

Item 1 also collects information about your internally recorded 'dealings' with your branch operations that records your attribution of your income and expenditure to the branch operations. Refer to the section titled Permanent establishments in the Introduction to these instructions for more information.

Accordingly, for the purpose of item 1, also treat the reference to a 'party' as though it extended to:

  • offshore branch operations carried on by an Australian resident - treat such operations as though they were instead a separate 'party' located in the branch country; and
  • Australian branch operations carried on by a non-resident - treat such operations as though they were instead a separate 'party' located in Australia.

The industry codes to be used in this question are those listed in the Business industry codes 2011 (NAT 1827).

The appropriate code is the code best describing the international business activities giving rise to or underlying the international dealings. It will not necessarily be the same as the code describing your general business activity or the kind of transaction between the parties.

Where your business is divided into divisions or business segments which can be categorised under one of the industry codes, this may also be an appropriate basis for responding to this item.

You are not expected to conduct a detailed financial analysis to answer item 1. A reasonable estimate is sufficient.

In the first column, at A, F and K write the industry code that describes the three main business activities giving rise to, or underlying the dealings carried out with international related parties. List these codes in descending order of total dollar value.

In the second column, at B, G and L write the value of the activities with international related parties for each of the industry codes. The value of the activities is the total for all locations in connection with the underlying business for each industry code. If part of the value of the activities is attributable to loans, this amount should not be included in the total value for each industry code.

In the third, fourth and fifth columns, write the foreign location code (from appendix 1) for the three foreign locations principally involved in the activities with international related parties for each industry code. If there are fewer than three locations for an industry code, list only those that apply. List the location codes in descending order of dollar value.

Example 1

An Australian manufacturing and holding company has three subsidiaries, located in Thailand, Singapore and Indonesia. The following international business activities occurred during the year:

  • The Thai subsidiary manufactured household appliances that were purchased by the Australian parent company for wholesale distribution. The value of these purchases was $50,000.
  • The Singapore subsidiary manufactured electrical components for distribution in Australia and South-East Asia. During the year, the Australian parent company purchased finished components for re-sale. The parent company also carried out product design projects on behalf of this subsidiary. The value of the products purchased was $900,000, and the value of the design work carried out by the Australian parent company was $40,000.
  • Dealings that the Australian parent company had with the Indonesian subsidiary consisted only of a loan to that subsidiary and the receipt of interest on the loan. The value of the loan was $250,000 and $25,000 interest was received. The loan was to enable the Indonesian subsidiary to undertake market research in Indonesia.

Select the code for the Australian parent company's underlying international businesses as follows:

  • Thailand (location code THA): household appliance wholesaling, that is, purchase of finished goods from its subsidiary for wholesale distribution (industry code 34940)
  • Singapore (location code SGP):
    • product design services (industry code 69230)
    • purchase of finished goods from its subsidiary for resale (industry code 34940)
     
  • Indonesia (location code IDN): the business activity giving rise to, or underlying, the loan was market research and the most appropriate industry code is market research service (industry code 69500).

The Australian parent company completes item 1 as follows:

A

34940

B

950,000

C

SGP

D

THA

E

 

F

69230

G

40,000

H

SGP

I

 

J

 

K

69500

L

25,000

M

IDN

N

 

O

 

The company writes the interest amount at L. The loan is not included in the total value for this industry code.

As there is no other market research activity with international related parties, the interest is the only amount written at this label.

Example 2

An Australian parent company has subsidiaries in New Zealand (location code NZL), Thailand (location code THA) and the United States of America (location code USA).

The company has three identifiable divisions:

  • chemical products manufacturing (industry code 18990). The related-party dealings by this division total $120,000 across all three locations
  • agricultural chemicals wholesaling (industry code 33230). The related-party dealings by this division total $200,000 across all three locations
  • mining and oilfield services (industry code 10900). The related-party dealings by this division total $700,000 across all three locations.

International transactions between the Australian parent company and its foreign subsidiaries can be reasonably attributed to each division's business activities.

Use codes from the Business industry codes 2011 at A, F and K and the appropriate location codes from appendix 1.

A

10900

B

700,000

C

NZL

D

THA

E

USA

F

33230

G

200,000

H

USA

I

NZL

J

THA

K

18990

L

120,000

M

THA

N

NZL

O

USA

Example 3

An Australian company carries out a food manufacturing business (industry code 11990) through its offshore branch operations carried on in New Zealand (location code NZL).

The company conducts market research in relation to food and confectionery (industry code 69500). The company conducts this market research partly in the course of its operations carried on at or through its New Zealand branch operations; however the costs of the market research are not wholly incurred by the company in the course of those New Zealand operations.

The Australian company has internally recorded the attribution of its expenditure incurred in the market research to its New Zealand branch operations. Specifically, the Australian company records that $2,400,000 of its total expenditure (of $10,000,000) incurred in the income year in conducting the market research is incurred by the Australian company in the course of its New Zealand branch operations.

The company completes item 1 as follows:

A

69500

B

2,400,000

C

NZL

D

 

E

 

F

 

G

 

H

 

I

 

J

 

K

 

L

 

M

 

N

 

O

 

QC24214