Pitcher Partners' international tax partner, Denise Honey, said the release of PSLA 2014/3, which will operate for three years, recognises that for some taxpayers the administrative burden of preparing documentation to comply with the new rules can be disproportionate to the transfer pricing risk associated with those taxpayers.
“The PSLA provides simplified record-keeping options for eligible taxpayers and activities who fall within certain ‘safe harbour’ pricing levels; however, it does not absolve taxpayers from undertaking their own transfer pricing analysis,” she said.
Ms Honey added that while it is encouraging to see the ATO trying to reduce the red tape burden on Australian businesses, the tax office could have gone further to help SMEs.
“SMEs in particular struggle to deal with the complexity of transfer pricing documentation requirements and some really have to consider whether the regulatory burden associated with overseas expansion outweighs the commercial benefits.”
“We would have liked to have seen the eligibility requirements in the PSLA expanded to allow a greater number of taxpayers to access the safe harbours in the PSLA. Currently the eligibility requirements are quite narrow. For example, PSLA only applies to inbound loans denominated in Australian dollars. Australian groups who loan monies to their overseas subsidiaries will not be able to access any safe harbours under the PSLA," she said.
“We would also have liked to see some blanket exemptions from the transfer pricing rules and/or documentation for SMEs. However, this would need to be done at a legislative level as the current legislation constrains what the ATO may do in this regard. If the government wishes to encourage Australian businesses to expand overseas this would be a great place in which to focus their red tape reduction agenda."