AUSTRALIA Law and Practice Contributed by: Michael Clough, Jerome Tse, Judith Taylor and Scott Heezen, King & Wood Mallesons
12. Co-Ordination With Customs Valuation 12.1 Co-Ordination Requirements Between Transfer Pricing and Customs Valuation If a transfer pricing adjustment is made in respect of dutiable goods, it is likely that a correspond - ing adjustment would be made to the value for customs. Retrospective adjustments to customs values are not automatic. 13. Controversy Process 13.1 Options and Requirements in Transfer Pricing Controversies A taxpayer dissatisfied with the ATO’s final deci - sion on a transfer pricing adjustment has the right to appeal. The appeal could go the Admin - istrative Review Tribunal, but almost invariably would go to the Federal Court which is a court of general jurisdiction. If the matter goes to the Tribunal, an appeal only lies on errors of law – the findings of fact are generally fixed. If the matter goes to the Federal Court, there is the right of appeal to a Full Court of the Federal Court. An appeal to the Full Court can be way of a rehear - ing subject to limitations that no further evidence is permitted without leave. An appeal from the Full Court is only available to Australia’s highest appellate court, the High Court, by special leave. 14. Judicial Precedent 14.1 Judicial Precedent on Transfer Pricing There are now three significant recent cases on transfer pricing (see 14.2 Significant Court Rul - ings ). Unfortunately, the analyses in those cases are somewhat at odds with each other. Accord -
ingly, the development of judicial principles is yet to be settled and may not be until the High Court hears a transfer pricing case. 14.2 Significant Court Rulings There are three recent Full Court of the Federal Court decisions on transfer pricing. Chevron v Commissioner of Taxation This case involved an intercompany cross-bor - der loan arising out of an internal restructure. The Court held that it is permissible under the transfer pricing rules for the Commissioner to reconstruct a term of the loan if independent parties would not have agreed to a loan on the actual terms. In that case the Court found that the Australian subsidiary was by it owns pro - jections expected to be unable to service the interest on the loan for some years (without divi - dends from a special purpose borrowing subsid - iary) and concluded that an independent lender would have insisted on a parent guarantee. The case was not appealed further by the taxpayer. Commissioner of Taxation v Glencore This case involved a transfer pricing adjustment to a commodities contract. The Court held that reconstruction of the pricing provisions would be permitted if independent parties would not have agreed to them. Glencore won because it produced sufficient evidence to prove that inde - pendent parties would agree to such terms. The Court decided that making more profits in Aus - tralia should not come at the expense of appro - priate market-based commercial prudence. The Commissioner was unsuccessful in seeking spe - cial leave to appeal to the High Court. Singtel v Commissioner of Taxation This was a case involving intercompany debt between an overseas parent and Australian sub - sidiary. The loan was subject to variations over
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