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ATO finalises Diverted Profits Tax guidance

ATO finalises Diverted Profits Tax guidance

Peter Madden and Fabian Fedele discuss the ATO's finalised guidance on the Diverted Profits Tax (DPT).


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The Australian Taxation Office (ATO) has finalised its guidance on the Diverted Profits Tax (DPT) with the release of both the DPT Practical Compliance Guideline (PCG 2018/5) and Law Companion Ruling (LCR 2018/6).

The finalised guidance addresses a number of the issues raised during consultation, clarifying how key elements of the DPT will be interpreted and more broadly how the ATO will apply the new measure. This includes:

  • expanded guidance on the broader DPT pre-requisite requirements including DPT tax benefit and principal purpose test
  • an additional high risk example on cross currency interest rate swaps and an additional low risk example on a commodities marketing hub
  • confirmation DPT is not a provision of last resort, but one which will only be applied in limited circumstances and concurrently with other tax rules (including transfer pricing provisions).

Furthermore, a particularly interesting aspect of the finalised PCG is the addition of a risk assessment tool, which provides a framework for taxpayers to self-assess their DPT risk.

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