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Australia: Transfer pricing focus in life sciences sector

Australia: Transfer pricing focus in life sciences

The Australian Tax Office (ATO) is currently actively focused on the pharmaceuticals and life sciences industry. As an industry dominated by multinational organisations and cross-border value chains, international tax issues and transfer pricing are at the heart of the ATO’s focus.

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The most recent movement began in 2015 with the Senate inquiry into multinational tax avoidance for which many pharmaceuticals and life science companies were called to appear. It now seems that the ATO feels compelled to review the industry given the political and public interest in multinationals corporations “paying their fair share of tax.” The ATO has been otherwise buoyed by the base erosion and profit shifting (BEPS) movement that has occurred in parallel, new laws in Australia, and the fact that the taxpayer bears the onus of proof. This means that more than ever, taxpayers need to consider transfer pricing when:

  • Entering arrangements, by considering how third parties would enter similar arrangements, showing the arrangements make commercial sense
  • Documenting the arrangements so that a robust transfer pricing analysis is undertaken and full supporting files are maintained
  • Sustaining positions as time passes, determining appropriate governance frameworks and processes exist to review/update the transfer pricing or the arrangements as and when required

With a focus on the industry and the “justified trust” program in full flight, ATO engagement is not a case of “if” but “when” for many taxpayers in the pharmaceuticals and life sciences industry. Active management and preparation may be the best strategy for navigating ATO inquiries.


For more information, contact a tax professional with KPMG’s Global Transfer Pricing Services practice in Australia:

Jeremy Capes | +61 2 9335 7665 | jeremycapes@kpmg.com.au

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