The Commissioner of Taxation has released a new Practice Statement, PS LA 2015/4, setting out “refreshed” practice and procedures for Advance Pricing Arrangements (APAs).  The process outlined in PS LA 2015/4 retains many of the features of the old APA process described in PS LA 2011/1, but adopts a new preliminary step, “triage”, which is intended to assist the Commissioner in selecting appropriate cases to proceed to a formal APA application.

PS LA 2015/4 is part of the ATO’s “reinvention agenda”. It outlines a new three-step process for APAs: Early Engagement, APA Application and Monitoring Compliance. In essence, this is a reworked version of the former five-step model in PS LA 2011/1. It applies to all APA requests: there is no longer a formal distinction between “simplified”, “standard” and “complex” APA products.

The new approach outlined in PS LA 2015/4 is intended to implement a principle-based, streamlined process for APAs, improving timelines and reducing red tape. It is also intended to reflect the objects, language and scope of Division 815 of the Income Tax Assessment Act 1997 (Cth).

Key changes

Three significant changes from the old PS LA 2011/1 model are as follows:

1. Make-up and structure of the APA team

APAs are now centrally managed by a new APA/MAP Program Management Unit (PMU). The PMU allocates cases to an Operations team (called the “APA team”) in the Active Compliance branch of Public Groups & International (PG&I) or Private Groups and High Wealth Individuals (PGH).

2. Introduction of a new “triage” process in the Early Engagement stage

A taxpayer’s “APA request” (formerly “APA proposal”) is now subject to review and analysis by a triage panel, which may include representatives from the PMU, the international profit shifting risk manager, a Competent Authority, the taxpayer’s ATO relationship manager, a representative from the Economist Practice and a tax technical expert (e.g. from the Technical Leadership Group), amongst others.

The triage process is described as a “profiling exercise”. In effect, it is a form of case selection. Its purpose is to assist the PMU in determining whether taxpayers’ APA requests should proceed to formal application. The process is said to draw upon lessons learned from the successful implementation of “early engagement approaches” for private ruling applications.

3. Changes to assurance and review

Assurance is now facilitated via workshops at the end of the Early Engagement and APA Application stages. The Transfer Pricing Review Panel, if it continues to exist, does not appear to have a role to play.

Where a taxpayer’s APA request is not accepted, opportunities for internal review are still available.

Other features

Other notable features of PS LA 2015/4 include the following:

  • Emphasis on the “global value chain” and “more than just pricing”: In evaluating a request for an APA, the APA team will have regard the totality of cross-border dealings between the parties, and will seek an explanation demonstrating that the “actual conditions” are “relevant and material to the taxpayer’s business”.  These features are consistent with the (intended) profit-based focus of Division 815, as compared with the narrower transaction-based focus of former Division 13.  They are also consistent with the Base Erosion and Profit Shifting landscape.
  • Emphasis on transparency: PS LA 2015/4 stresses the need for a “free flow of information” to support the development of a collaborative relationship between taxpayers and APA team members.
  • Collateral issues: Collateral issues, such as the applicability of anti-avoidance rules, should now generally be addressed and resolved in parallel with the development of an APA.  PS LA 2011/1 previously required the applicability of Part IVA to be determined before progressing an APA.


The introduction of the triage step should provide scope for more comprehensive case assessment by the Commissioner at the initial stages of the APA process. It is important that triage does not result in complex or controversial cases being blocked from the APA process – indeed, these are the very cases for which an APA may be appropriate. Further, particularly for complex cases, significant front-end work from taxpayers, even prior to the initial triage step, is still required.

For many taxpayers, the APA process has taken on greater significance following the implementation of a self-assessment regime for transfer pricing in Division 815. While the process has been “streamlined”, it will still require a substantial time commitment from taxpayers. Conclusion of an APA even under this new process may still take up to two years.

Who does this affect?

Taxpayers with cross border dealings, including with permanent establishments.

What do you need to do?

Taxpayers should be aware of the new APA process and consider whether an APA may be appropriate for their cross border dealings.