Document ID: chunk:federal_register_of_legislation:C2025C00029:section:6:p21
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 6 (pt 21/22)
Character Range: 6994016–6996887

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 815‑120(1)(c)(ii)—working out the amount (if any) of the entity's loss of a particular *sort for the income year; and
 (c) if the transfer pricing benefit arises under subparagraph 815‑120(1)(c)(iii)—working out the amount (if any) of the entity's *tax offsets for the income year; and
 (d) if the transfer pricing benefit arises under subparagraph 815‑120(1)(c)(iv)—working out the amount (if any) of *withholding tax payable by the entity in respect of interest or royalties.

815‑120  When an entity gets a transfer pricing benefit
 (1) 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 if:
 (a) those conditions (the actual conditions) differ from the *arm's length conditions; and
 (b) the actual conditions satisfy the cross‑border test in subsection (3) for the entity; and
 (c) had the arm's length conditions operated, instead of the actual conditions, 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 a particular *sort for an income year would be less;
 (iii) the amount of the entity's *tax offsets for an income year would be less;
 (iv) an amount of *withholding tax payable in respect of interest or royalties by the entity would be greater.

Absence of condition
 (2) For the purposes of subsection (1), there is taken to be a difference between the actual conditions and the *arm's length conditions if:
 (a) an actual condition exists that