Developed in line with the ATO’s guidance in PCG 2017/4, law firm Gilbert + Tobin has created an online calculator to help businesses review both in-bound and outbound financing arrangements and provide users with a tax risk rating according to the relevant features of their transaction and the profile of the parties involved.
The calculator will be available as a free online resource for any tax clients considering a related party transaction.
Speaking to Accountants Daily, Gilbert + Tobin partner, Muhunthan Kanagaratnam said the development of the calculator marks the start of its intentions to use technology in its tax advice services.
“This is the first one we've focused on because we were doing a lot of things manually and we didn't think this was the most efficient use of our time and not the most cost-effective thing for our clients,” said Mr Kanagaratnam.
“From a tax perspective we will be looking at other things that we can use technology for to simplify things.
“As a general trend, everyone is conscious of the use of technology and you will see others come up with things but we are very much focused on it.”
While the calculator has not received formal approval from the ATO, Mr Kanagaratnam believes it will not be an issue, considering how it repackages the publicly available PCG into a “user-friendly format”.
Noting the ATO’s current focus on the cross-border related transactions market, Mr Kanagaratnam said the calculator aims to offer guidance on the likely approach of the ATO in allocating its compliance resources to reviewing and auditing their specific financing arrangements.
According to Mr Kanagaratnam, the calculator is also suitable for foreign investors who are required to make Foreign Investment Review Board (FIRB) applications, with applicants often required to disclose the risk rating for new and existing financing arrangements.
“What the tool does is use the same methodology that the Tax Office would use so that anyone can assess their own financing arrangements and it gives them two options,” said Mr Kanagaratnam.
“One, is to say we're going to take measures to lower the risk rating from red to yellow, and the second thing is it gives people the opportunity to say ‘yes, that is our rating but there are good reasons why and we're going to put documentation in place to justify why it is still acceptable notwithstanding the rating that the assessment tool throws at it’.”