Simplified Transfer Pricing Record Keeping

The ATO has introduced an online Simplified Transfer Pricing Record Keeping options guide which provides relief from preparing full transfer pricing documentation for perceived low risk taxpayers. This was introduced in recognition of the fact that compliance with the requirements of Subdivision 284-E imposed administrative burden that would be disproportionate to the taxpayers non compliance risk. Where a taxpayer is eligible and opts to rely on a simplified option, it will not need to prepare documentation in accordance with Subdivision 284-E. In general the Simplified Transfer Pricing Record Keeping options are available for taxpayers that meet one of the following criteria:

  • Small business taxpayers with Australian economic group turnover of less than $25 million
  • No more than 15% of the total revenue of the Australian economic group is earned from services provided, with mark-up on costs no less than 7.5%
  • Distributors with Australian economic group turnover of less than $50 million and with a profit before income tax ratio of 3% or greater
  • Intragroup service dealings (being non-specified (i.e. non-core) services) of $1 million or less (the de-minimus rule) or, if greater than $1 million, no more than 15% of the total expenses of the Australian economic group are incurred for services received, with the mark-up on costs no greater than 7.5% (this mark-up on costs also applies to de-minimus services received)
  • Low level intragroup loans where the combined cross border balance is less than $50 million for the Australian economic group (at all times throughout the year), and where the inbound loans interest rate is no more than the Reserve Bank of Australia indicator lending rate for 'small business; variable; residential-secured; term' loans.

In each of the above cases, certain additional criteria must also be met which limits the circumstances in which a taxpayer may opt to rely on the simplified record keeping options. These additional criteria (which are not all described above) must be monitored carefully to ensure eligibility to opt for the simplified option. A taxpayer will disclose on the International Dealings Schedule (IDS) the selection and application of these simplified options, with these options available for an initial period of three years, over which time their use will be monitored by the ATO. It is noted that such a disclosure option will not be available for 2014 IDS's.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances and can be obtained from Walker Wayland NSW Sydney.