The Prime Minister has released a list of priority legislation, to be introduced in the Autumn parliamentary session, which commences on 5 February 2013.
High on the list is the Tax Laws Amendment (Cross-Border Profit Allocation) Bill, which is expected to introduce the second tranche of transfer pricing reforms.
This follows the release (on 22 November 2012) of an exposure draft of these reforms and a period of industry consultation, which we summarise here.
Submissions on the exposure draft closed on 20 December 2012. Key concerns, as expressed in a range of industry submissions, include:
- the scope and extent of the reconstructive powers contained in subdivision 815-B; the key industry concern focussed on the uncertainty taxpayers will face, given the ATO's extensive power to substitute arm's length conditions for the commercial realities of the transaction;
- the onerous nature of the record-keeping requirements contained in subdivision 815-D, with no concession granted for small to medium businesses; and
- the absence of a mechanism enabling penalties to be remitted to a rate of less than 10%; industry submissions on this point highlight that this approach does not provide any incentive to voluntarily comply.