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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).

Peter Madden

National Leader, International Tax

KPMG Australia


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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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