Profit shifting – related party dealings
The ATO will review activities where income and profits sourced in Australia are not being subjected to domestic tax; and where related party dealings provide opportunities to enter into non-economic/commercial arrangements to facilitate profit-shifting arrangements.
What attracts the ATO's attention:
o Paying a non-arm's length amount for goods and services, or the transfer or use of property (tangible and intangible, such as intellectual property).
o Paying non-arm's length prices to generate excessive losses or expenses domestically while shifting gains or revenue outside the jurisdiction.
o Relying on financial instruments and accounting techniques to artificially create, assign or transfer rights and obligations in order to manipulate financial dealings between related parties.
o Tax planning that structures business operations for shifting assets, risks and functions to low tax jurisdictions.
o Non-disclosure of offshore asset disposals or restructures.
o Businesses employing strategies that may lead to an erosion of the corporate tax base.