Division 815 Technical Working Group minutes - December 2013

Meeting details


ATO office 747 Collins St Docklands




17 December 2013








Michael Jenkins


Caroline Briers

Contact and Secretariat:

Caroline Briers

Contact phone:

(03) 9285 1502


ATO Members


Michael Jenkins

Assistant Commissioner, Public Groups and International

Caroline Briers


Michael McCormack

Senior Tax Counsel

Kevin O'Shaughnessy

Senior Director, Technical Leadership Group

Michelle Osler

Director, Technical Leadership Group

Frank Cipriano

Director, Technical Leadership Group

Penny Georgiou (for Paul Korganow)

Senior Director, Internationals

Matt Hayes

ATO Consultant

External representatives

Reynah Tang


Soulla McFall


Vanda Davis


Damian Preshaw


Anthony Seve (phone)


Jesper Solgard (for Paul Balkus)


Richard Atkinson (for Sharon Jansen)


Denise Honey

ATO appointee

Stuart Edwards

ATO appointee


Paul Korganow

ATO, Assistant Commissioner, Profit Shifting Practice

Gus Falkenhagen

ATO, Senior Director, Project Manager

Sharon Jansen


Wayne Sutherland


Chris Bowman

ATO appointee

Michael Kobetsky

ATO appointee

William Potts


Agenda items


Division 815 Technical working group agendas, minutes and related papers are not binding on the Australian Taxation Office (ATO) or any of the other bodies referred to in these papers. While every effort is made to accurately record views expressed, the wording necessarily represents a summary of statements of general position only, and care should be taken in interpreting those statements. These papers reflect the position at the date of release (unless otherwise noted) and readers should note that the position on any issue may subsequently change.

1. Introduction and Welcome

The Chair welcomed the group and introduced members.

2. ATO consultation framework

The Chair provided details of the new ATO consultation framework and advised that this group has been convened under the auspices of a technical and special purpose working group specifically to look at administrative and interpretive solutions to issues associated with the administration and operation of Division 815 ITAA 1997.

The Chair advised that the group will be discussing products that are works in progress, not formal ATO views at that point. This is seen as a qualifier on any discussion as the ATO is not locked into any position at that stage.

A member queried that, if the group is for consultation and liaison and the discussions are not an ATO view, then what are the protocols for reporting back to colleagues? The member also queried whether there is flexibility to distribute documents to colleagues for feedback.

The Chair advised that there are sensitivities regarding distribution of documents as they are not pre-consultative documents; however he is happy for members to pass on discussions. The ATO wants to ensure that products are sustainable as they are important for taxpayers and ATO staff and consult where we can to ensure that the products are balanced and workable.

The Chair advised that the group will have a limited life and will not consider issues outside of Division 815. Meetings are expected to be held quarterly. However, the new framework is flexible and responsive. Therefore, ad-hoc meetings by phone or videoconference can be held more frequently, if required. Minutes will be published on the ATO website.

3. Update on project

The ATO advised that there are a number of products in development based on previous feedback from TPWG meetings.

  • Taxation Ruling on the application of section 815 -130. At this stage, we are seeking feedback on some of the examples, which are designed to show how the legislation works in practice and what the boundaries and exceptions are. There are 12 examples and 3 will be provided for discussion at this meeting.
  • Taxation Ruling on transfer pricing documentation dealing with the requirements in Division 284 of the TAA 1953 and the interaction with section 262A of the ITAA 1936.
  • Two PS LAs to support the documentation ruling, one on low level dealings and small business and one on the steps in the documentation process.
  • One PS LA on penalties for Div 815-B and C. (Another PS LA is contemplated looking at penalties under Div 815-A).

The ATO advised that all the documents are first cut draft stage with internal feedback/ comments having been received in respect of some of them. The 2 rulings are due to go to the rulings panel on 28 February 2014. It is intended that the two PSLAs relating to documentation and the one on penalties will accompany the rulings as a package and be discussed at the Public Rulings Panel.

The ATO requested that members consider, to the extent that there is capacity in the New Year, what is the next set of priorities for rulings?

One member suggested that loans be considered. However, the Chair advised that work is being done on this by the OECD at the moment. Another member advised that the former Transfer Pricing Working Group had circulated a list of all the documents to be considered and reviewed and requested that this be revised and updated for discussion.

Action Item number


Action item name

Circulate list of documents to be reviewed for members to consider next priorities





Expected delivery date

Next meeting

4. Discussion of products


The ATO made some introductory remarks in relation to the development of the Ruling and its scope and noted that the current OECD white paper is a discussion paper only, not approved guidance as yet.

The Chair advised that the ATO can only formally give guidance on Australia's domestic law. Internationally, there is discussion about how multinational enterprises prepare documentation for revenue authorities and the option of a global master file to support local requirements; however the ATO will be providing guidance only on local requirements.

A member advised that they consider there is a need to deal with the global position so that there isn't conflict between views. As an example, you can't have one position for the ATO, one for another revenue authority and another for Customs. It is preferable to have consistent practices that work for all.

The Chair advised that the collective view is that there should be no major surprises in the rulings and that the draft ruling will be released for discussion. It is uncertain at this stage whether the PSLAs will be released as drafts for external comment as well, however the ATO will consider this.

There was also discussion among members regarding arms' length pricing and the price setting policy with reference to the paragraph 3.89 of the EM regarding 'real bargaining'. The ATO advised that the ruling and other documents adopt a principles-based approach, rather than being overly prescriptive.

Discussion occurred regarding low-level transactions and small business and whether there will be any levels set. The ATO advised that the ruling is based on prudent business management rather than necessarily having a bright line test. Members expressed a desire to have a bright line to reduce compliance costs. The ATO advised that they appreciate the concern; however, the law itself does not provide for safe harbours.

Members noted that taxpayers with related party dealings below $2M don't need to disclose their dealings in the IDS.


The ATO advised that the Penalties PS LA will address Subdivs 815-B and C only and that there will be a separate PSLA addressing 815-A. The structure will mirror other penalty PS LAs. Questions were raised by members regarding whether penalty remission will be to nil for transfer pricing, particularly with regard to the new reconstruction powers. The ATO advised that it is not correct at law to set out factors that auditors need to take into account and to restrict the Commissioner's powers. Recent case law states that auditors must take into account all relevant factors.

Section 815 -130

The ATO provided three examples for consideration by the group, one each covering subsections 815-130(2), (3) and (4). The ATO advised that the ruling will contain multiple simple examples to keep clarity in illustrating the point rather than load too much detail into examples. Otherwise, the message can be missed. Members discussed the examples and provided feedback. Members felt that while simple examples are good, it would be beneficial to also include some more complex examples that bring in multiple issues.

Michael McCormack requested that any comments, other possible examples, areas that need coverage and interaction issues be sent to him before Christmas either directly, or via the secretariat.

5. Other business

International Dealings Schedule

The ATO advised that a separate consultation forum will be established by Paul Korganow to address issues raised regarding the IDS.

Status of old rulings

Due to the lack of any time remaining, this matter will be held over to next meeting.

Action Item number


Action item name

Status of old rulings




Held over

Expected delivery date

Next meeting

Next meeting

The next meeting is scheduled for March 2014. The Secretariat will advise of arrangements closer to the date.

    Last modified: 06 Mar 2015QC 39794