Skip to content
Tax Manager, TMF Australia
29 October 2019
Read time
2 minutes

Simplified transfer pricing record keeping options in Australia

operah house

Australian entities that meet certain requirements can shortcut the usual lengthy and expensive transfer pricing record keeping process.

The Australian Taxation Office’s (ATO) transfer pricing record keeping requirements are known for being quite onerous and expensive. Companies typically need to call upon specialised accountants to carry out a detailed study involving comparisons with competitor arm’s length pricing methodologies for benchmarking purposes. However, in some circumstances Australian entities are able to take a shortcut using simplified transfer pricing record keeping (STPRK).

What is transfer pricing documentation?

Transfer pricing (TP) documentation needs to be prepared and regularly updated by Australian entities which have international related party dealings (IRPDs). They must demonstrate – through detailed TP documentation – that the conditions of the IRPDs are consistent with arm’s length conditions so that the taxpayer does not receive a “transfer pricing benefit.”

The TP documentation requirements are quite burdensome and specify, amongst other things, that:

  • the documentation is prepared in the same time period as the transaction
  • the way the relevant TP provisions apply to the entity’s IRPDs are explained
  • the documentation explains why the specific application of the TP provisions to the entity’s IRPDs best achieves consistency with the relevant guidance materials (eg. 2017 OECD Transfer Pricing Guidelines).

In practice this means the TP report must contain detailed information about alternative pricing methodologies and actual pricing and/or margins charged by independent parties operating in the same industry under similar conditions, so that IRPDs can be appropriately benchmarked.

Reducing the compliance burden with STPRK

STPRK is an administrative ‘safe harbour’ offered by the ATO to businesses which meet certain strict criteria.

To be eligible for STPRK, Australian entities must satisfy eligibility criteria for one of the following seven simplified record-keeping options:

  • small taxpayers
  • distributors
  • low value adding intra-group services
  • low-level inbound loans
  • materiality
  • technical services
  • low-level outbound loans.

The criteria differ depending on which of the options apply. For example, one of the eligibility conditions for the ‘small taxpayers’ option above is that local turnover is less than AUD 50 million and IRPDs do not include royalties above a certain threshold.

The ATO will generally not allocate compliance resources to qualifying entities beyond reviewing their eligibility for STPRK. The entity would then only need to keep simple documentation that substantiates their eligibility.

Talk to us

TMF Australia can help companies assess their eligibility for simplified transfer pricing record keeping. Our in-country accounting and tax experts can:

  • review your business activities
  • provide guidance on how to reduce the TP documentation burden whilst remaining compliant
  • prepare the necessary simplified documentation demonstrating how eligibility criteria are met.

Start-ups or recently established businesses in Australia can particularly benefit from our expertise. Need more information? Contact us today.

Discover where Australia ranks among 76 jurisdictions for business complexity – download the free report.

tmf group taiwan city skyline at sunset
Company formation and administration
How Taiwan’s Company Act amendments will affect your business

Amendments to Taiwan Company Act may affect how you do business.

Explore Topic
tmf group retail shops in india
Company formation and administration
Indian retailers should get ready for IFRS 16-driven change

The burden of complying with IFRS 16 is likely to fall inordinately on companies in the sprawling Indian retail sector.

Explore Topic