Income Tax Assessment Act 1997
An entity gets a transfer pricing benefit from conditions that operate between the entity and another entity in connection with their commercial or financial relations if:
(a) those conditions (the actual conditions ) differ from the *arm ' s length conditions; and
(b) the actual conditions satisfy the cross-border test in subsection (3) for the entity; and
(c) had the arm ' s length conditions operated, instead of the actual conditions, one or more of the following would, apart from this Subdivision, apply:
(i) the amount of the entity ' s taxable income for an income year would be greater ;
(ii) the amount of the entity ' s loss of a particular *sort for an income year would be less ;
(iii) the amount of the entity ' s *tax offsets for an income year would be less ;
Absence of condition 815-120(2)
(iv) an amount of *withholding tax payable in respect of interest or royalties by the entity would be greater .
For the purposes of subsection (1), there is taken to be a difference between the actual conditions and the *arm ' s length conditions if:
(a) an actual condition exists that is not one of the arm ' s length conditions; or
(b) a condition does not exist in the actual conditions but is one of the arm ' s length conditions. Cross-border test 815-120(3)
Conditions that operate between an entity and another entity in connection with their commercial or financial relations satisfy the cross-border test if:
(a) the conditions meet the overseas requirement in the following table for either or both of the entities; or
(b) the conditions operate in connection with a *business that the entity carries on in an *area covered by an international tax sharing treaty.
The conditions meet the overseas requirement for this type of entity:
|1||any of the following:
(a) an Australian resident;
(b) a resident trust estate for the purposes of Division 6 of Part III of the Income Tax Assessment Act 1936 ;
(c) a partnership in which all of the partners are, directly or indirectly through one or more interposed partnerships, Australian residents or resident trust estates
|the conditions operate at or through an *overseas permanent establishment of the entity.|
|2||an entity not covered by column 1 of item 1||the conditions do not operate solely at or through an *Australian permanent establishment of the entity.|
For the purposes of the table in subsection (3), treat any entity that is an Australian resident as not being an Australian resident if:
(a) the entity is also a resident in a country that has entered into an *international tax agreement with Australia containing a *residence article; and
(b) under that residence article, the entity is taken, for the purposes of the agreement, to be a resident only of that other country. Nil amounts 815-120(5)
For the purposes of this section and section 815-145 :
(a) treat an entity that has no taxable income for an income year as having a taxable income for the year of a nil amount; and
(b) treat an entity that has no loss of a particular *sort for an income year as having a loss of that sort for the year of a nil amount; and
(c) treat an entity that has no *tax offsets for an income year as having tax offsets for the year of a nil amount Meaning of residence article 815-120(6)
A residence article is:
(a) Article 4 of the United Kingdom convention (within the meaning of the International Tax Agreements Act 1953 ); or
(b) a corresponding provision of another *international tax agreement.
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