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Australian economic group

For the purposes of the simplified record-keeping options for transfer pricing, an Australian economic group consists of an entity together with all the entities it is required by the Australian accounting standards to include in consolidated financial statements.

An entity can be a company, partnership, superannuation fund, or trust.

Combined cross-border loan balance

You include all interest-bearing and interest-free loan balances for amounts borrowed and loaned.

If you have branch operations, you include the amounts claimed or returned for internally recorded dealings as amounts borrowed or loaned, interest-bearing and interest-free.

You do not net off the amounts borrowed or loaned but include both totals.


The cost base used for the service options (intra-group, management and administration, and technical) should reflect all relevant costs, both direct and indirect, associated with the services.

In relation to pass through costs where the service provider merely acts as an agent, thereby not actually providing the services itself but facilitating the provision of the services as an intermediary, these costs should not be included in the cost base.


You are a distributor if your main business activity – as you put on your tax return – has an ANZIC Wholesale Trade code.

Australian and New Zealand Standard Industrial Classification (ANZSIC), 2006 (Revision 1.0) Chapter 8 Division F – The Wholesale Trade Division includes units mainly engaged in the purchase and on-selling, the commission based buying, and/or the commission based selling of goods, without significant transformation, to businesses. Units are classified to the Wholesale Trade Division in the first instance if they buy finished goods and then on-sell them (including on a commission basis) to businesses.

Interest rate

Inbound loans

The applicable RBA indicator rate – 'small business, variable, residential-secured, term' – is a column in 'Indicator lending rates – F5', one of a series of interest rates published on the RBA website (search Statistics >Economic and Financial Statistics/Interest Rates and select the Excel spreadsheet). The rates are set monthly.

See also:

International related-party dealings

You have international related-party dealings if you have international commercial or financial dealings or relations between related parties, for example, an agreement with your foreign subsidiary.

International related parties

An international related party includes any of the following:

  • any overseas entity or person who participates directly or indirectly in your management, control or capital
  • any overseas entity or person in respect of which you participate directly indirectly in their management, control or capital
  • any overseas entity or person in respect of which those who participate directly or indirectly in their management, control or capital are the same as those who participate directly or indirectly in your management, control or capital.


To be classified as a loan for the purposes of these options, the instrument must be a debt interest under Division 974 of the Income Tax Assessment Act 1997.

Management and administration services

Management and administration services are activities that:

  • involve or relate to the control, facilitation, and monitoring of your business's human resources (staffing) and financial resources (assets)
  • relate to administering your day to day business operations usually including but not limited to:
    • back office services
    • administrative services associated with employee share-based plans/recharge amounts
    • accounting services.

Management and administration services exclude activities integral to financing, marketing or production.

Profit-before-tax ratio

Profit-before-tax is calculated by subtracting the sum of the total expenses labels from the sum of the total income labels on your income tax return. The profit before tax ratio is calculated using the profit before tax amount divided by turnover.

For the purposes of using these options, the ratio is to be calculated as a weighted average of three consecutive years, including the year for which you are considering applying the option.


A restructure event for the purposes of these options, consistent with the definition in TR 2011/1 refers to arrangements in which assets, functions or risks of a business are transferred between you and your international related parties or your branch operations. Such arrangements may include:

  • reorganisation of your structure resulting in the disposal or acquisition of entities or the change of ownership of entities
  • establishment, expansion, reduction, liquidation or relocation of business operations or business lines, resulting in the  
    • acquisition or disposal of assets or liabilities (tangible or intangible)
    • transfer of functions or the significant modification of service arrangements between yourself and international related parties (for example, transfer of agency, distribution, finance, information technology, insurance, logistics, marketing, sales, shared services, shipping, trading, transport and treasury functions)
    • transfer of risks between yourself and international related parties
    • increase or decrease of rights or obligations
  • a change in the nature of the business carried on through your branch operations (for example, you have commenced or ceased to use your property in your branch operations or to perform functions or services through your branch operations).

See also:

  • TR 2011/1 Income tax: application of the transfer pricing provisions to business restructuring by multinational enterprises

Specified countries

Specified countries are the tax jurisdictions listed in the table below:



Antigua & Barbuda






British Virgin Islands

Cayman Islands

Cook Islands







Isle of Man




Marshall Islands







Saint Kitts and Nevis

Saint Lucia

Saint Martin (Dutch Part)

Saint Vincent & the Grenadines


San Marino


Turks and Caicos Islands

US Virgin Islands




Specified service related-party dealings

A specified service between related parties is any strategic activity that contributes significantly to the creation, enhancement or maintenance of value in the Australian economic group.

These services include:

  • development of various forms of intellectual property and know how
  • financial trading and execution activities
  • insurance activities
  • investment and asset management activities
  • research and development activities
  • software development activities
  • strategic sales, marketing and relationship management and related activities.

Sustained losses

Sustained losses occur where you have incurred losses for three consecutive years, including the year for which you are considering applying the option.

For the purposes of these options, a loss is calculated by subtracting the sum of the total expenses labels from the sum of the total income labels on your income tax return.

Technical services

Technical services are advice and/or assistance or support provided by persons with relevant technical expertise for activities associated with engineering, architecture and industrial design.

Technical services exclude advice or assistance associated with:

  • the use of IP, know-how, processes, systems or other like intangibles or rights
  • provision or acquisition of goods, commodities, other services (including financial services) or financial accommodation
  • the provision or acquisition of marketing or other activities associated with engagement with customers or potential customers


For the purposes of these options, turnover is the total ordinary income you derive in the ordinary course of carrying on a business. It includes income sourced from sales, rent, dividends, interest, distributions etc. For example, a company would use the amount reported at the total income label on its tax return.

    Last modified: 07 Jan 2016QC 43562