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  • Advice under development – international issues

    We are developing advice and guidance on the following international issues.

    [3708] Forex realisation event 4

    Title
    Draft Taxation Determination
    Income tax: does forex realisation event 4 happen to the debtor under subsection 775-55(1) of the Income Tax Assessment Act 1997 on repayment of a loan taken out prior to the effective date of a choice to use the applicable functional currency and denominated in the same non-Australian dollar currency that later becomes the applicable functional currency?

    Registered
    11 February 2015

    Purpose
    The draft Determination will set out proposed clarification on whether forex realisation event 4 happens on repayment of a loan obligation incurred prior to the effective date of an applicable functional currency choice and denominated in the same non-Australian dollar currency that later becomes the applicable functional currency.

    Expected completion
    To be advised

    [3765] Transfer pricing rules and debt/equity tests

    Title
    Draft Taxation Determination
    Income tax: can the debt and equity rules in Division 974 of the Income Tax Assessment Act 1997 limit the operation of the transfer pricing rules in Subdivision 815-B of the Income Tax Assessment Act 1997?

    Registered
    15 July 2016

    Purpose
    The draft Determination will provide the Commissioner’s proposed view on whether Division 974 can limit the operation of Subdivision 815-B.

    Expected completion
    31 October 2018

    [3832] Diverted profits tax

    Title
    Final Law Companion Ruling
    Diverted profits tax

    Registered
    4 April 2017

    Purpose
    The final Ruling will provide the Commissioner’s view on some of the new concepts that have been introduced by the new law.

    Expected completion
    27 September 2018

    Comments
    LCR 2017/D7 published on 18 December 2017.

    Title
    Final Practical Compliance Guideline
    Diverted profits tax

    Registered
    4 April 2017

    Purpose
    The final Guideline will set out our client engagement framework for the diverted profits tax (DPT) and our approach to risk assessment and compliance activity when the DPT is identified as a potential area of concern.

    Expected completion
    26 September 2018

    Comments

    PCG 2018/D2 published on 7 February 2018.

    [3838] Corporate residency – central management and control in Australia

    Title
    Final Practical Compliance Guideline
    Income tax: central management and control test or residency: identifying where a company's central management and control is located

    Registered
    22 June 2017

    Purpose
    The final Guideline will provide practical guidance on how to apply the Commissioner's view in TR 2018/5 Income tax: central management and control test of residency.

    Expected completion
    To be advised

    Comments
    PCG 2018/D3 published on 21 June 2018. Comments period closed on 20 July 2018.

    [3900] Related party financing – derivatives

    Title
    Final Schedule 2 to Practical Compliance Guideline PCG 2017/4
    Related party derivative financial arrangements

    Registered
    20 February 2017

    Purpose
    The final Schedule will set out the risk indicators associated with a financing arrangement, related transaction, or contract entered into with cross-border related parties involving ‘derivatives’.

    Expected completion
    30 October 2018

    Comments
    Draft Schedule 2 to PCG 2017/4 published on 1 August 2018. Responses received during consultation are being considered.

    [3901] Related party financing – interest free loans

    Title
    Draft Schedule 3 to Practical Compliance Guideline PCG 2017/4
    Interest free loans between related parties

    Registered
    June 2016

    Purpose
    The draft Schedule will set out the proposed principles for determining whether interest free loans made between related parties should be characterised as either debt or equity in identifying the arm’s length conditions.

    Expected completion
    30 September 2018

    [3902] Offshore hubs – non-core procurement

    Title
    Final Schedule 2 to Practical Compliance Guideline PCG 2017/1
    Offshore Procurement Hubs
    Registered
    16 January 2017

    Purpose
    The final Schedule will set out the ATO’s risk assessment framework, including the low risk benchmark for offshore procurement hubs that supply ‘indirect’ or ‘non-core’ goods or services.

    Expected completion
    November 2018

    Comments
    Draft Schedule 2 to PCG 2017/1 published on 27 June 2018. Comments period closed on 27 July 2018.

    [3906] Thin capitalisation: arm's length debt test (compliance approach)

    Title
    Draft Practical Compliance Guideline
    ATO compliance approach to the following thin capitalisation issues:

    • asset recognition, valuation and revaluation, and
    • application of the arm’s length debt test.

    Registered
    September 2017

    Purpose
    The draft Guideline will set out the ATO's proposed compliance approach to taxpayers’ recognition and valuation of assets for the purposes of the thin capitalisation regime in Division 820 of the Income Tax Assessment Act 1997.

    Expected completion
    Late 2018

    Comments
    Guidance on the issue of asset recognition, valuation and revaluation has been put on hold subject to the passage of legislation to enact the relevant Budget measure, at which time we will consider how to proceed.

    Work on the compliance approach to be taken to the application of the arm's length debt test is continuing.

    [3907] Thin capitalisation: mining rights recognition and revaluation

    Title
    Draft Taxation Determination
    Income tax: can a mining, quarrying or prospecting right be revalued in determining the safe harbour debt amount under Division 820 of the Income Tax Assessment Act 1997 (ITAA 1997)?

    Registered
    September 2017

    Purpose
    The draft Determination will set out the proposed ATO view relating to the classification and revaluation of a mining right in accordance with accounting standards when applying the thin capitalisation rules contained within Division 820 of the ITAA 1997.

    Expected completion
    To be advised – currently on hold

    Comments
    Publication of this draft Determination is subject to the passage of legislation to enact the relevant Budget measure.

    [3908] Thin capitalisation: bifurcation of financial instruments

    Title
    Final Taxation Determination
    Income tax: thin capitalisation – valuation of debt capital for the purposes of Division 820

    Registered
    August 2016

    Purpose
    The final Determination will set out the ATO view relating to the valuation of a taxpayer’s debt capital in accordance with accounting standards when applying the thin capitalisation rules contained within Division 820 of the ITAA 1997.

    Expected completion
    TD 2018/D4 published on 1 August 2018. Comments period closed on 31 August 2018.

    [3909] Thin capitalisation: internally generated intangibles

    Title
    Draft Taxation Determination
    Can a taxpayer recognise and revalue their internally generated intangible asset in accordance with the accounting standards for the purpose of the thin capitalisation rules contained in Division 820 of the Income Tax Assessment Act 1997?

    Registered
    April 2016

    Purpose
    The draft Determination will set out the proposed ATO view relating to the recognition and revaluation of internally generated intangible assets in accordance with accounting standards when applying the thin capitalisation rules contained within Division 820 of the ITAA 1997.

    Expected completion
    Early 2019

    Comments

    Publication of this draft Determination is subject to the passage of legislation to enact the relevant Budget measure.

    [3910] Thin capitalisation: arm’s length debt test

    Title

    Draft Taxation Ruling
    Application of the thin capitalisation arm’s length debt test

    Registered
    July 2016

    Purpose
    The draft Ruling will set out the proposed ATO view on the application of the of the arm’s length debt test for the thin capitalisation regime.

    Expected completion
    Late 2018

    Comments
    TR 2003/1 Income tax: thin capitalisation applying the arm's length debt test will be withdrawn at the time of publication of this draft Ruling.

    [3913] Thin capitalisation: what type of costs are debt deductions within the scope of subparagraph 820-40(a)(iii) of the ITAA 1997?

    Title
    Final Taxation Determination
    Income tax: what type of costs are debt deductions within the scope of subparagraph 820-40(1)(a)(iii) of the Income Tax Assessment Act 1997?

    Registered
    Dec 2017

    Purpose
    The final Determination will set out the ATO view relating to what the Commissioner considers to be costs directly incurred in relation to a taxpayer’s debt capital that are within the scope of subparagraph 820-40(1)(a)(iii) for the purposes of applying the thin capitalisation rules contained within Division 820 of the ITAA 1997.

    Expected completion
    TD 2018/D5 was published on 1 August 2018. Comments period closed on 31 August 2018.

    [3926] Application of transfer pricing provisions to mobile offshore drilling units (MODUs)

    Title
    Draft Practical Compliance Guideline
    Transfer Pricing – cross border leasing involving vessels (including mobile offshore drilling units)

    Registered
    June 2018

    Purpose
    The draft Guideline will set out the ATO's proposed compliance approach to transfer pricing issues relating to the use of mobile offshore drilling units (MODUs), such as drill-ships, drilling rigs (including but not limited to submersibles, semi-submersible and jack-up rigs), pipe-laying vessels (PLVs) and heavy-lift vessels (HLVs).

    Expected completion
    September 2018

    [3927] Part IVA of the Income Tax Assessment Act 1936 and restructures of hybrid mismatch arrangements

    Title
    Final Practical Compliance Guideline
    Part IVA of the Income Tax Assessment Act 1936 and restructures of hybrid mismatch arrangements

    Registered
    June 2018

    Purpose
    The final Guideline will provide administrative guidance on the application of Australia’s general anti-avoidance rules (Part IVA) to restructuring and unwinding of arrangements undertaken in response to the introduction of  Division 832 of the Income Tax Assessment Act 1997 and associated legislative amendments (the hybrid mismatch rules).

    Expected completion
    To be advised

    Comments
    PCG 2018/D4 published on 21 June 2018. Comments and submissions period closed on 20 July 2018.

    [3932] Taxing US and UK resident financial institutions under US and UK taxation conventions

    Title
    Addendum to Taxation Ruling TR 2005/5
    Income tax: ascertaining the right to tax United States (US) and United Kingdom (UK) resident financial institutions under the US and the UK taxation conventions in respect of interest income arising in Australia

    Registered
    July 2018

    Purpose
    The Addendum will clarify certain aspects of the second limb of the definition of 'financial institution' which is used in Australia's double tax conventions with the US and the UK.

    Expected completion
    December 2018

    [3941] Inbound supply chains

    Title
    Draft Practical Compliance Guideline
    Inbound supply chains

    Registered
    September 2018

    Purpose
    A strategy has been developed to manage the transfer pricing risk associated with supply chains into Australia, to provide taxpayers with transparent and tailored client experiences. At this stage, this focusses on the key industry sectors of information communication and technology, pharmaceuticals, motor vehicles, as well as general distributors.

    A draft Guideline is being developed to outline the ATO’s compliance approach to these arrangements and to help taxpayers make informed decisions about their tax affairs.

    Expected completion
    December 2018

    [3942] Transfer pricing: cross border leasing

    Title
    Draft Practical Compliance Guideline
    ATO compliance approach to transfer pricing issues associated with cross border leasing of foreign residence vessels in Australia (lease in lease out arrangements)

    Registered
    September 2018

    Purpose
    To provide practical guidance on the application of the transfer pricing provisions to cross-border leasing of vessels into Australia.

    Expected completion
    September 2018

    Last modified: 17 Sep 2018QC 50317