Document ID: chunk:federal_register_of_legislation:C2025C00029:section:2:p5
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 2 (pt 5/11)
Character Range: 7009102–7011879

The object of this Subdivision is to ensure that the amount brought to tax in Australia by entities operating *permanent establishments is not less than it would be if the permanent establishment were a distinct and separate entity engaged in the same or comparable activities under the same or comparable circumstances, but dealing wholly independently with the other part of the entity.

815‑210  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.
 (3) For the purposes of this Subdivision, a branch to which subsection 160ZZW(2) of the Income Tax Assessment Act 1936 (about certain Australian branches of foreign banks) applies is taken not to be, and not to have been at any time since its establishment, a *permanent establishment in Australia of the bank.

815‑215  Substitution of arm's length profits
 (1) For the purposes covered by subsection (2), if an entity gets a *transfer pricing benefit from the attribution of profits to a *PE of the entity:
 (a) the amount of profits actually attributed to the PE is taken not to have been so attributed; and
 (b) instead, the *arm's length profits are taken to have been attributed to the PE.
Note: 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 815‑220(1)(b)(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 815‑220(1)(b)(ii)—working out the amount (if any) of a loss of a particular *sort for the income year; and
 (c) if the transfer pricing benefit arises under subparagraph 815‑220(1)(b)(iii)—working out the amount (if any) of the entity's *tax offsets for the income year.

815‑220  When an entity gets a transfer pricing benefit
 (1) An entity gets a transfer pricing benefit from the attribution of profits to a *PE of the entity if:
 (a) the amount of profits (the actual profits) attributed to the PE differs from the *arm's length profits for the PE; and
 (b) had the arm's length profits, instead of the actual profits, been attributed to the PE, one or more of the following would, apart from this Subdivision, apply:
 (i) the amount of the entity's taxable income for an income year would be greater;
 (ii) the amount of the entity's loss of