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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
    Final 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 final Determination will provide the Commissioner’s view on whether Division 974 can limit the operation of Subdivision 815-B.

    Expected completion
    To be advised

    Comments
    Draft TD 2018/D6 published 31 October 2018. Comments period closes on 30 November 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
    November 2018

    Comments
    Draft PCG 2018/D3 published on 21 June 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
    December 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 factors for determining whether an interest-free loan between related parties could be either debt or equity in identifying the arm’s length conditions.

    Expected completion
    November 2018

    [3906] Thin capitalisation: asset valuations

    Title
    Draft Practical Compliance Guideline
    ATO compliance approach to asset recognition, valuation and revaluation for thin capitalisation purposes

    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
    To be advised

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

    [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

    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
    February 2019

    Comments
    Draft TD 2018/D4 published on 1 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
    To be advised

    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 arm’s length debt test for the thin capitalisation regime.

    Expected completion
    March 2019

    Comments
    Publication of this draft Ruling will accompany the new draft Practical Compliance Guideline on the arm's length debt test. TR 2003/1 Income tax: thin capitalisationapplying the arm's length debt test will be withdrawn at the time of publication of this draft Ruling.

    Title
    Draft Practical Compliance Guideline
    Thin capitalisation: arm's length debt test

    Registered
    October 2018

    Purpose
    The draft Guideline will set out the ATO's proposed compliance approach to taxpayers' use of the arm's length debt test for the purposes of the thin capitalisation regime in Division 820 of the Income Tax Assessment Act 1997. This will include a schedule outlining risk indicators for the correct application of the arm's length debt test.

    Expected completion
    March 2019

    Comments
    The draft Guideline will accompany the draft Ruling above.

    [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
    March 2019

    Comments
    TD 2018/D5 published on 1 August 2018.

    [3926] 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 (LILO)

    Registered
    June 2018

    Purpose
    The draft Guideline will provide proposed practical guidance on the application of the transfer pricing provisions to cross-border leasing of vessels into Australia, by setting 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-submersibles and jack-up rigs), pipe-laying vessels (PLVs) and heavy-lift vessels (HLVs).

    Expected completion
    To be advised

    [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

    [3940] Inbound supply chains

    Title
    Draft Practical Compliance Guideline
    Transfer pricing issues related to inbound distribution arrangements

    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
    November 2018

    [3944] Prevention of treaty abuse

    Title
    Draft Practical Compliance Guideline
    Prevention of treaty abuse: the principal purpose test

    Registered
    October 2018

    Purpose
    The draft Guideline will explain our proposed approach to administering the principal purpose test in a tax agreement that has been modified by the enactment of the Multilateral Instrument.

    Expected completion
    December 2018

    Title
    Draft Law Administration Practice Statement
    Applying the OECD's MLI Article 7 on the prevention of treaty abuse

    Registered
    October 2018

    Purpose
    The draft practice statement will provide proposed guidance to assist our staff in applying the principal purpose test and therefore deny a benefit under a covered tax agreement, or to rule on the application of the principal purpose test in a private ruling, class ruling or product ruling. The draft practice statement will also outline the proposed role and operation of the General Anti-Avoidance Rules Panel in relation to the principal purpose test.

    Expected completion
    December 2018

    [3946] Offshore shipping service hubs

    Title
    Draft Schedule 3 to Practical Compliance Guideline PCG 2017/1
    Offshore shipping service hubs

    Registered
    October 2018

    Purpose
    The draft Schedule will set out the principles for taxpayers to self-assess their transfer pricing risk for certain types of offshore shipping service hub arrangements.

    Expected completion
    November 2018

    [3950] OECD hybrid mismatch rules

    Title
    Draft Law Companion Ruling
    Division 832 – OECD hybrid mismatch rules – concept of structured arrangement

    Registered
    October 2018

    Purpose
    The draft Ruling will provide the Commissioner's proposed view in relation to the terms 'structured arrangement' and 'party to the structured arrangement' set out in section 832-210 of the Income Tax Assessment Act 1997.

    Expected completion
    To be advised

    Title
    Draft Law Companion Ruling
    Division 832 – OECD hybrid mismatch rules – targeted integrity rule

    Registered
    October 2018

    Purpose
    The draft Ruling will provide the Commissioner's proposed view in relation to the hybrid mismatch targeted integrity rule in Subdivision 832-J of the Income Tax Assessment Act 1997.

    Expected completion
    To be advised

    Title
    Draft Law Companion Ruling
    Division 832 – OECD hybrid mismatch rules – foreign law interactions

    Registered
    October 2018

    Purpose
    The draft Ruling will provide the Commissioner's proposed view of the law on certain concepts in Division 832 of the Income Tax Assessment Act 1997, including:

    • foreign law corresponding to Division 832 of the Income Tax Assessment Act 1997
    • an amount being included in working out the tax base of another entity under a provision of a law of a foreign country that corresponds to sections 456 or 457 of the Income Tax Assessment Act 1936
    • provisions of another law of a foreign country relating to foreign income tax that has substantially the same effect as foreign hybrid mismatch rules
    • law of a foreign country that has substantially the same effect as Part X of the Income Tax Assessment Act 1936.

    Expected completion
    To be advised

    Last modified: 02 Nov 2018QC 50317