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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
    To clarify whether FRE 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
    To provide the Commissioner’s view on whether Division 974 can limit the operation of Subdivision 815-B.

    Expected completion
    29 June 2018

    Comments
    As a result of internal feedback the subject of the proposed draft taxation determination in reference [3766] Transfer pricing benefit from an outbound/inbound interest free loan was incorporated into this draft taxation determination. Targeted external consultation is proposed to be undertaken in conjunction with the draft interest-free loan schedule to PCG 2017/4 at reference [3901].

    [3832] Diverted profits tax

    Title
    Final Law Companion Ruling
    Diverted profits tax

    Registered
    4 April 2017

    Purpose
    To provide the Commissioner’s view on some of the new concepts that have been introduced by the new law.

    Expected completion
    30 June 2018

    Comments
    LCR 2017/D7 published on 18 December 2017

    Title
    Final Practical Compliance Guideline
    Diverted profits tax

    Registered
    4 April 2017

    Purpose
    To 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
    To be advised

    Comments

    PCG 2018/D2 published on 7 February 2018.

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

    Title
    Final Taxation Ruling
    Income tax: Foreign Incorporated Companies: central management and control test of residency

    Registered
    16 November 2016

    Purpose
    To provide the ATO’s view on ‘central management and control in Australia’ for the purposes of paragraph (b) of the definition of ‘resident’ or ‘resident of Australia’ in subsection 6(1) of the Income Tax Assessment Act 1936.

    Expected completion
    June 2018

    Comments
    TR 2017/D2 published on 15 March 2017.

    The final Taxation Ruling will replace TR 2004/15 following the High Court decision in Bywater Investments Limited & Ors v. Commissioner of Taxation; Hua Wang Bank Berhad v. Commissioner of Taxation [2016] HCA 45, 2016 ATC 20-589.

    We are considering comments and issues raised during consultation which will be taken into account in finalising the Ruling.

    See also:

    Title
    Draft Practical Compliance Guidelines
    Income tax: central management and control test of residency: identifying where a company's central management and control is located.

    Registered
    22 June 2017

    Purpose
    To provide practical guidance in support of TR 2017/D2 on the ATO's view on ‘central management and control in Australia’ for the purposes of paragraph (b) of the definition of ‘resident’ or ‘resident of Australia’ in subsection 6(1) of the Income Tax Assessment Act 1936.

    Expected completion
    June 2018

    Comments
    The draft Practical Compliance Guideline will provide complementary practical guidance to the ATO's view in TR 2017/D2, following the High Court decision in Bywater Investments Limited & Ors v. Commissioner of Taxation; Hua Wang Bank Berhad v. Commissioner of Taxation [2016] HCA 45, 2016 ATC 20-589.

    Targeted consultation on the practical compliance guidance has now ended. We are considering comments and issued raised which will be taken into account in developing the draft Practical Compliance Guideline.

    [3865] MAAL – directly in connection with supply

    Title
    Final Taxation Determination
    Income tax: what does ‘directly in connection with the supply’ mean in sub-paragraph 177DA(1)(a)(ii) of the Income Tax Assessment Act 1936?

    Registered
    May 2017

    Purpose
    To provide guidance on when activities undertaken in Australia will be directly in connection with a supply by a foreign entity under the Multinational Anti-Avoidance Law.

    Expected completion
    September 2018

    Comments
    TD 2018/D1 published on 2 May 2018. Comments period closes 1 June 2018.

    [3900] Related party financing – derivatives

    Title
    Draft Schedule 2 to Practical Compliance Guideline PCG 2017/4

    Related party derivative financial arrangements.

    Registered
    20 February 2017

    Purpose
    To 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
    29 June 2018

    [3901] Related party financing – interest free loans

    Title
    Draft Schedule 5 to Practical Compliance Guideline PCG 2017/4

    Interest free loans between related parties

    Registered
    June 2016

    Purpose
    To set out the 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
    29 June 2018

    [3902] Offshore hubs – non-core procurement

    Title
    Draft Schedule 2 to Practical Compliance Guideline PCG 2017/1

    Offshore Procurement Hubs

    Registered
    16 January 2017

    Purpose
    To 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
    October 2018

    [3906] Thin capitalisation: 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
    Sets out the compliance approach of the ATO 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. This will include a schedule outlining risk indicators for arrangements associated with recognition and revaluation of mining rights and a separate schedule setting out the ATO’s compliance approach to taxpayers’ arm’s length debt test calculations.

    Expected completion
    Second half of 2018

    [3907] Thin capitalisation: mining rights recognition and revaluation

    Title
    Draft Tax 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
    To set out the 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
    29 June 2018

    [3908] Thin capitalisation: bifurcation of financial instruments

    Title
    Draft Tax Determination

    Can a taxpayer value their debt capital 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
    August 2016

    Purpose
    To 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
    29 June 2018

    [3909] Thin capitalisation: internally generated intangibles

    Title
    Draft Tax 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
    To set out the 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
    29 June 2018

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

    Title

    Draft Tax Ruling

    Application of the thin capitalisation arm’s length debt test

    Registered
    July 2016

    Purpose
    To set out the ATO view on the application of the of the arm’s length debt test.

    Expected completion
    29 June 2018

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

    Title
    Draft Tax Determination

    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
    To 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
    29 June 2018

    Last modified: 01 Jun 2018QC 50317