Australia: Transfer pricing arrangements and JobKeeper payments (COVID-19)

Australia: Transfer pricing arrangements

The Australian Taxation Office (ATO) released information addressing the treatment of JobKeeper payments in transfer pricing arrangements.


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The JobKeeper program was established to provide employment-related relief in response to the coronavirus (COVID-19) pandemic.

The ATO guidance (July 2020) reports that the ATO will assess the impact of the JobKeeper payment on transfer pricing arrangements, by reviewing arrangements in situations when the JobKeeper payment has resulted in a change to the transfer price paid or received by the Australian entity and was shown to effectively shift the benefit of the government assistance to offshore related parties.

The ATO stated that the expectation is that Australian entities will retain the benefit of JobKeeper payments that they receive.

A significant number of businesses with varying transfer pricing arrangements are potentially affected by the JobKeeper program. The ATO release includes the following example of the appropriate transfer pricing treatment of JobKeeper payments.


Assume an Australian subsidiary of a multinational group provides information technology services to its offshore related party. It charges the full cost of providing the services plus a profit mark-up of 10%. The profit mark-up is based on a comparability analysis and is assumed to be arm’s length. The Australian subsidiary incurs $60* of salary cost and other operating costs of $40, totaling $100. The Australian subsidiary is eligible for and receives the JobKeeper payment amounting to $60, which subsidises the $60 of salary cost. The JobKeeper payment is presented in the Australian subsidiary’s profit and loss statement as a reduction of the related salary expenses. The correct transfer pricing treatment of the JobKeeper payment is calculated as follows:

  • Salary expense ($60) + other operating costs ($40) = total cost ($100)
  • Total cost ($100) + mark-up (10%) = transfer price ($110)

The profit and loss statement is calculated as follows:

  • Revenue (transfer price) − salary expense − other operating costs = net income.
  • $110 − $0 ($60 subsidised by $60 JobKeeper payment) − $40 = $70.

The ATO concluded by explaining that JobKeeper payments are not to result in a reduction of the price of the service provided to the offshore related party. No reduction is to be made to the cost of the service. The cost base in the example remains at $100, which continues to attract a mark-up of $10.

*$=Australian dollar

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