AUSTRALIA Law and Practice Contributed by: Michael Clough, Jerome Tse, Judith Taylor and Scott Heezen, King & Wood Mallesons
3.2 Unspecified Methods Transfer pricing methods that are not specified by law are allowed but the onus is on the tax - payer to demonstrate that the method is reliable. In practice, this is usually very difficult. 3.3 Hierarchy of Methods The methods and their hierarchy set out in the OECD Guidelines are normally used. 3.4 Ranges and Statistical Measures Ranges are common in evidence from experts, which reflects the subjectivity of some opinions. Courts usually prefer the midpoint of the appro - priate range. 3.5 Comparability Adjustments The transfer pricing provisions operate on an annual basis. At year end, a review should be conducted to determine if any adjustment is required. In the 2024–25 Federal Budget, the government announced the discontinuation of previously announced rules to deny, from 1 July 2023, tax deductions for payments made by those with annual global group turnover exceeding AUD1 billion) relating to intangible assets connected with low corporate tax jurisdictions. In its place, the government announced new measures to penalise, from 1 July 2026, significant global entities that are found to have mischaracterised or undervalued royalty payments, to which roy - alty withholding tax would otherwise apply – this has not yet been legislated, and there does not appear to be draft legislation currently before Parliament. 4. Intangibles 4.1 Notable Rules
Australia has rules on interest. These include lim - itations under onerous thin capitalisation rules and internal debt creation rules, and the more traditional transfer pricing rules (which can still apply over the top of those other limitations). 4.2 Hard-to-Value Intangibles The government is considering how to imple - ment Action 8 of the OECD’s Base Erosion and Profit Shifting (BEPS). The taxpayer always runs the risk of the Australian Taxation Office (ATO) using post-fact evidence if it is persuasive. The taxpayer should always document the basis for the price and related evidence at the time of the transaction. This follows from the rule that the taxpayer bears the onus of proof. 4.3 Cost Sharing/Cost Contribution Arrangements Cost sharing or contribution can be recognised but require adequate and reliable supporting evi - dence. In practice, the ATO has some internal guidance on certain types. 5. Adjustments 5.1 Upward Transfer Pricing Adjustments Voluntary disclosures of adjustments are permit - ted. They will lead to amended assessments if the taxpayer has supporting evidence and it is within the amendment period. 5.2 Secondary Transfer Pricing Adjustments Consequential adjustments are permitted where fair and reasonable.
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