Australian Tax Office Warns Multinationals on Restructuring

The Tax Management Transfer Pricing Report ™ provides news and analysis on U.S. and international governments’ tax policies regarding intercompany transfer pricing.

By Murray Griffin

Sept. 15 — The Australian Tax Office issued firm warnings to multinationals and their tax advisers after identifying two restructuring arrangements it says are without commercial justification and designed solely to avoid paying tax.

One of the two taxpayer alerts, both issued Sept. 15, warns against a scheme that purports to circumvent the Multinational Anti-Avoidance Law (MAAL) targeted at very large companies that seek to avoid the attribution of profits to a permanent establishment in Australia.

The ATO alert (TA 2016/11) on multinationals says the scheme involves interposing a partnership between a foreign supplier and its Australian customers.

The partnership would have one resident corporate partner with a minority interest in the partnership, and on that basis claim to be an “Australian entity” for the purposes of the MAAL.

By purporting to treat the partnership as an Australian entity, the scheme seeks to artificially circumvent the application of the MAAL by contending there is no supply being made or income being derived by a foreign entity.

Taxpayers that attempt to use such artificial schemes will be “subject to increased scrutiny” and advisers promoting it potentially face prosecution as promoters of a tax exploitation scheme, the alert says.

Deputy Commissioner Mark Konza said the scheme was “another creative attempt to undermine the policy intent of the MAAL.”

The ATO was confident it had “identified this particular scheme early, before it has had a chance to spread from a handful of companies that have implemented the structure,” he said.

‘Round Robin' Financing

The other alert (TA 2016/10) warns against cross-border “round robin” financing arrangements that involve the funding of an overseas entity or operations by an Australian entity.

While the exact mechanism varies, typically an Australian company claims interest deductions on a loan from an overseas related party that is funded by the Australian company “investing” in the overseas related party, the alert says.

“The end result is deductions are claimed but income arising from this round-robin investment is subject to little or no tax,” it says.

The ATO Aug. 10 also issued a series of alerts to shut down other schemes it said were being used to sidestep MAAL (25 Transfer Pricing Report 499, 8/25/16).

To contact the reporter responsible for this story: Murray Griffin in Melbourne at

To contact the editor responsible for this story: Rita McWilliams at

For More Information

TA 2016/11 is at

TA 2016/10 is at

Copyright © 2016 Tax Management Inc. All Rights Reserved.

Request Transfer Pricing Report