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Item 3

Last updated 26 November 2009

Item 3a

This item asks whether any non-monetary consideration has been given or received in any dealings with related international parties.

These dealings may include providing services, transferring property (both tangible and intangible) or any similar dealings.

The nature of the dealing in which the non-monetary consideration is provided may be a barter, swap, bonus or discount, or any type of similar agreement.

Non-monetary consideration will generally include any consideration other than:

  • monetary payment
  • payment by cheque
  • telegraphic and bank-to-bank transfer of funds
  • inter-company loan account charges.

In particular, debt-for-equity swaps and non-monetary settlements of inter-company loan accounts will be taken to be non-monetary consideration.

Start of example

Example 5

A taxpayer purchased trading stock for $20 million from an international related party.

If, rather than paying for the trading stock with a $20 million telegraphic funds transfer to the related party's loan account, the decision was made to settle the debt by any of the following:

  • forgiving royalties that would otherwise be payable by the international related party
  • transferring title in a fixed asset
  • agreeing to a discount on specified future transactions print Y for yes at B.

However, where individual debts between two parties are aggregated or netted and the net balance settled monetarily, this will not be considered to be non-monetary consideration.

As mentioned earlier, for the purposes of Schedule 25A, a permanent establishment is to be treated as a separate party from its head office or other related parties. Consequently, where non-monetary consideration passes between a permanent establishment and its head office in return for the provision of services or other transactions listed on Schedule 25A, print Y for yes at B item 3a.

End of example

Item 3b

This item asks whether you have made any provision of services, transfer of assets (both tangible and intangible) or any similar dealings with any related international party, for which you received no consideration.

Start of example

Example 6

An Australian parent company manufactures trading stock that it sells to a foreign subsidiary for resale. The Australian parent develops a new product, which requires considerable training of the foreign subsidiary's staff in order to on-sell the new product.

The Australian parent provides this training, but does not charge the subsidiary. The Australian company should print Y for yes at C.

Similarly, the answer yes at C would also be required where an Australian company owned a trademark that it allowed an international related party to use without payment.

A permanent establishment should be regarded as a separate, but related, party to that of the head office for the purposes of this item.

Where there is no charge or adjustment allocating income or expenditure between the parties for a provision of services, transfer of property or other transactions listed on Schedule 25A by:

  • the head office to the permanent establishment, or
  • the permanent establishment to the head office or another related international party,

this will be regarded as being for nil consideration. Print Y for yes at C. Where you have disclosed an outbound interest-free loan at item 2f on Schedule 25A, the answer yes is not required at C.

End of example