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Australia Updates Transfer Pricing Legislation to Refer to Latest OECD Guidelines

The Australian Taxation Office issued a release on 29 July 2020 to announce that Australia's transfer pricing legislation has been updated to refer to the latest OECD transfer pricing guidelines. The update is provided as part of the Treasury Laws Amendment (2019 Measures No. 3) Act 2020 and applies retrospectively from 1 July 2017.

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Transfer pricing legislation update

Australia's transfer pricing legislation has been updated to specify that it is to be interpreted to achieve consistency with the Organisation for Economic Co-operation and Development (OECD) Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations 2017 as the relevant guidance material. It will be applied retrospectively for income years starting on or after 1 July 2017.

Specifically, the reference to the OECD Transfer Pricing Guidelines in subsection 815-135(2) of the Income Tax Assessment Act 1997 (Cth) has been updated from the 2010 edition to the 2017 edition.

The 2017 OECD Transfer Pricing Guidelines include revisions made as a result of:

  • the Aligning Transfer Pricing with Value Creation
  • Actions 8-10 Final Reports of the OECD
  • revisions to Chapter IX of the guidelines concerning business restructurings.

This guidance material is relevant for determining the arm's length conditions in respect of multinational enterprises' cross-border dealings.

The 2017 OECD Transfer Pricing Guidelines are commonly referred to by taxpayers and the retrospective application ensures greater certainty for taxpayers and advisors by commencing shortly after the OECD's Committee on Fiscal Affairs adopted the 2017 transfer pricing guidelines.

This update forms part of Australia's ongoing commitment to strengthen our transfer pricing provisions in line with international best practice. It will help ensure that multinational enterprises are paying their fair share of tax in Australia.

We will be updating our guidance material that references the previous 2010 OECD Transfer Pricing Guidelines and the Actions 8-10 Report to align with this amendment.

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