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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

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. 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 information contained 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.

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