Document ID: chunk:federal_register_of_legislation:C2013A00101:clause:2_2:p1
Version: federal_register_of_legislation:C2013A00101
Segment Type: clause
Provision Reference: sch 2 cl 2 (pt 1/3)
Character Range: 9588–12652

2  At the end of Division 815
Add:

Subdivision 815‑B—Arm's length principle for cross‑border conditions between entities

Guide to Subdivision 815‑B

815‑101  What this Subdivision is about

      This Subdivision applies if an entity would otherwise get a tax advantage in Australia from cross‑border conditions that are inconsistent with the internationally accepted arm's length principle.
      The entity is treated for income tax and withholding tax purposes as if arm's length conditions had operated.

Table of sections

Operative provisions
815‑105 Object
815‑110 Operation of Subdivision
815‑115 Substitution of arm's length conditions
815‑120 When an entity gets a transfer pricing benefit
815‑125 Meaning of arm's length conditions
815‑130 Relevance of actual commercial or financial relations
815‑135 Guidance
815‑140 Modification for thin capitalisation
815‑145 Consequential adjustments
815‑150 Amendment of assessments

Operative provisions

815‑105  Object
 (1) The object of this Subdivision is to ensure that the amount brought to tax in Australia from cross‑border conditions between entities is not less than it would be if those conditions reflected:
 (a) the arm's length contribution made by Australian operations through functions performed, assets used and risks assumed; and
 (b) the conditions that might be expected to operate between entities dealing at *arm's length.
 (2) The Subdivision does this by specifying that, where an entity would otherwise get a tax advantage from actual conditions that differ from *arm's length conditions, the arm's length conditions are taken to operate for income tax and withholding tax purposes.

815‑110  Operation of Subdivision
 (1) Nothing in the provisions of this Act other than this Subdivision limits the operation of this Subdivision.
 (2) Nothing in this Subdivision limits Division 820 (about thin capitalisation) in its application to reduce, or further reduce, *debt deductions of an entity.

815‑115  Substitution of arm's length conditions
 (1) For the purposes covered by subsection (2), if an entity gets a *transfer pricing benefit from conditions that operate between the entity and another entity in connection with their commercial or financial relations:
 (a) those conditions are taken not to operate; and
 (b) instead, the *arm's length conditions are taken to operate.
Note 1: The conditions that operate include, but are not limited to, such things as price, gross margin, net profit, and the division of profit between the entities.
Note 2: There are special rules about documentation that affect when an entity has a reasonably arguable position about the application (or non‑application) of this Subdivision: see Subdivision 284‑E in Schedule 1 to the Taxation Administration Act 1953.
 (2) The purposes covered by this subsection are:
 (a) if the *transfer pricing benefit arises under subparagraph 815‑120(1)(c)(i)—working out the amount (if any) of the entity's taxable income for the income year; and
 (b) if the transfer pricing benefit arises under subparagraph