November 20, 2009

PKN Alert Australia - ATO to challenge large business on transfer pricing

As part of the Strategic Compliance Initiative (SCI) announced in the May 2009 Federal Budget, the ATO intends to significantly increase its focus on transfer pricing in the large taxpayer market (i.e. revenue greater than A$250m) over the next four years.

The ATO intends to issue between 150-180 transfer pricing questionnaires during late November and early December 2009, with the planned areas of focus being:

• Low profit and/or loss making entities;
• Intra-group finance, guarantee fees;
• Business restructures and transformations;
• Inbound and outbound intellectual property transactions; and
• Foreign banks.

Following the questionnaires, we understand that the ATO anticipates a sustained program of more detailed and/or focused risk reviews and audits. It is also expected that a large number of Advance Pricing Arrangements (APAs) may be commenced as taxpayers seek certainty for their future dealings.  Therefore, it is highly likely that the issuance of these questionnaires is just the start of a sustained campaign which is expected to last for at least four years.

To support this program the ATO has undertaken a big recruitment campaign and has made job offers to around 60 personnel who will focus solely on transfer pricing.  Many of these are experienced transfer pricing practitioners from the profession, industry and from within other areas of the ATO.

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