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Income Tax: cross-border profit allocation – review of transfer pricing rules

We refer to the Consultation Paper in relation to the above matter issued on 11 February 2016 and inviting submissions by 26 February 2016. 

As you are aware, the Law Council of Australia is the peak body for the Australian legal profession and through the Taxation Committee of its Business Law Section (Taxation Committee) has been an active participant in Treasury consultations regarding the development of Australia’s new transfer pricing regime and, more recently, the administrative aspects of the regime through the Division 815 Working Group established by the Australian Taxation Office (ATO), albeit now disbanded. 

The Consultation Paper invites feedback on the following questions: 

1 Would there be any significant unintended consequences for Australia if these recommendations are incorporated as relevant guidance for the purposes of applying Division 815 of the ITAA 1997? 

2 Are there any significant challenges with commencing the new Guidance for income years starting on or after 1 July 2016? 

3 It is envisaged in section 815-135 of the ITAA 1997 that documents to be relied upon in applying Australia’s transfer pricing rules can be prescribed by way of regulation. Are there any reasons why regulation (as opposed to legislative amendment) is not the appropriate method for incorporating the recommendations contained within the 2015 OECD report. 

4 What new ATO guidance/explanatory materials do you think the ATO will need to prepare (and what existing ATO guidance/explanatory materials will need to be updated) if the changes by the 2015 OECD Report are adopted? 

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