To prevent multinational entities from reducing their tax liabilities in Australia, Australia’s transfer pricing rules apply the arm’s
length principle to dealings between both associated and non-associated entities so that any non-arm’s length dealings should reflect the
economic contribution by the local entities.
Independent parties engaging in private arrangements may enjoy the economic benefits of that conduct. However, they will not be exempt from
the applicability of these rules simply by reason of their non-association. The transaction must, however, meet the requirements of the
applicable cross-border test.
Australia doesn't have a list of prescribed transfer pricing documentation requirements but it does have normal tax record-keeping
requirements which the taxpayer must meet to avoid any potential penalties. However, if a tax liability arises, then the taxpayer will need
to show that she had a "reasonably arguable position" by meeting several key documentation requirements. Doing this helps to avoid
penalties.
Documentation of related transactions must be contemporaneous, in English or easily convertible to English, and should show how the
arm's-length standard was applied and explain why this is consistent with the OECD guidelines.
There is no legislative rule specifying the number of days after a request that the documentation needs to be provided, and information/documentation requests will specify a due date. However, the documentation is to be provided more often than not, contemporaneously with the tax return, which makes it readily available. In Australia, the burden of proof is also on the taxpayer to ensure that the actual conditions of the transaction are consistent with arm’s length conditions.
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