Modern transfer pricing legislation brings Australia onto global stage
New legislation announced by the federal government today, updating the rules between related parties undertaking cross-border transactions, seeks to align Australia’s transfer pricing laws with the Organisation for Economic Cooperation and Development (OECD) best practice guidelines.
According to the Institute of Chartered Accountants Australia (the Institute) tax counsel Paul Stacey, the new legislation creates a stable framework for both international investors and Australian businesses operating abroad.
“Australia is a relatively small, open market economy that is heavily reliant on foreign direct investment to help drive growth in our productive capacity. Aligning our transfer pricing rules with the OECD standards is an important step in enabling Australian businesses to compete efficiently on the global stage,” says Mr Stacey.
“We’re living in an increasingly borderless world, and more and more business is being conducted cross-border. What’s important here is that Australia’s rules are consistent with best practice in the global economy to ensure we remain an attractive business destination,” he says.
The legislation introduced today includes provisions around the regulators’ powers to reconstruct actual transactions, which are now consistent with OECD standards. Mr Stacey says this addresses a significant concern of the business community as expressed during the consultation process.
“A quality consultation process has resulted in an improved outcome today. However, it would have been better yet if the government had excluded SMEs from these rules. The compliance burden posed for small business exceeds the revenue risk to the government,” he adds.
When approved, the new legislation is set to come into effect on 1 July 2013.
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Article last Updated 20 December 2013