The Australian Taxation Office (ATO) is offering administrative concessions in relation to administrative penalties and interest on historical positions to certain taxpayers that: (1) proactively assess and voluntarily disclose tax risks associated with offshore hubs; and (2) are prepared to restructure their arrangements.
Non-cooperative taxpayers face ineligibility for the advanced pricing arrangements (APA) program, ATO's formal use of its information gathering authority, and increased prospects of litigation.
The ATO has released a draft “Practical Compliance Guideline” (PCG) setting out its risk assessment framework in relation to hubs. Taxpayers have a strategic decision to make in relation to the hubs—to self-assess risk and proactively engage with the ATO, or risk an ongoing cycle of reviews and audits. The amnesty will be available for a period of 12 months from the finalisation of the PCG.
While the ATO's focus to date has been on potential tax risks associated with hubs, limited guidance has been issued. Instead, the ATO has made announcements regarding its concerns and numerous risk reviews and audits are already underway.
For hub arrangements in the energy and resources sector, when the hub profit is greater than a 100% mark up of hub costs, the draft PCG indicates a current compliance focus on:
In an environment of increased scrutiny on taxpayer payments of the appropriate amount of tax, the ATO’s concern is not limited to transfer pricing risks, but may also involve the controlled foreign corporation (CFC) regime, capital gains tax, and the general anti-avoidance provisions. Specifically areas of focus may include whether:
Prudent taxpayers would consider the tax risks associated with their position in light of the PCG. Taxpayers need to consider strategies to manage risk—including preparation of appropriate transfer pricing analysis and evidence, if their position were to be examined by the ATO or ultimately a court or tribunal.
The draft PCG has been released for public consultation, with comments due by 30 September 2016. It is expected that the PCG will be finalised in October 2016.
© 2020 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.