Commonwealth Consolidated Acts Commonwealth Consolidated Acts(1) An entity gets a transfer pricing benefit from conditions that operate between the entity and another entity in connection with their commercial or financial relations if:
(a) those conditions (the actual conditions ) differ from the * arm's length conditions; and
(b) the actual conditions satisfy the cross - border test in subsection (3) for the entity; and
(c) had the arm's length conditions operated, instead of the actual conditions, one or more of the following would, apart from this Subdivision, apply:
(i) the amount of the entity's taxable income for an income year would be greater ;
(ii) the amount of the entity's loss of a particular * sort for an income year would be less ;
(iii) the amount of the entity's * tax offsets for an income year would be less ;
(iv) an amount of * withholding tax payable in respect of interest or royalties by the entity would be greater .
Absence of condition
(2) For the purposes of subsection (1), there is taken to be a difference between the actual conditions and the * arm's length conditions if:
(a) an actual condition exists that is not one of the arm's length conditions; or
(b) a condition does not exist in the actual conditions but is one of the arm's length conditions.
Cross - border test
(3) Conditions that operate between an entity and another entity in connection with their commercial or financial relations satisfy the cross - border test if:
(a) the conditions meet the overseas requirement in the following table for either or both of the entities; or
(b) the conditions operate in connection with a * business that the entity carries on in an * area covered by an international tax sharing treaty.
Overseas requirement | ||
Item | Column 1 The conditions meet the overseas requirement for this type of entity: | Column 2 if: |
1 | any of the following: (a) an Australian resident; (b) a resident trust estate for the purposes of Division 6 of Part III of the Income Tax Assessment Act 1936 ; (c) a partnership in which all of the partners are, directly or indirectly through one or more interposed partnerships, Australian residents or resident trust estates | the conditions operate at or through an * overseas permanent establishment of the entity. |
2 | an entity not covered by column 1 of item 1 | the conditions do not operate solely at or through an * Australian permanent establishment of the entity. |
(4) For the purposes of the table in subsection (3), treat any entity that is an Australian resident as not being an Australian resident if:
(a) the entity is also a resident in a country that has entered into an * international tax agreement with Australia containing a * residence article; and
(b) under that residence article, the entity is taken, for the purposes of the agreement, to be a resident only of that other country.
Nil amounts
(5) For the purposes of this section and section 815 - 145:
(a) treat an entity that has no taxable income for an income year as having a taxable income for the year of a nil amount; and
(b) treat an entity that has no loss of a particular * sort for an income year as having a loss of that sort for the year of a nil amount; and
(c) treat an entity that has no * tax offsets for an income year as having tax offsets for the year of a nil amount.
Meaning of residence article
(6) A residence article is:
(a) Article 4 of the United Kingdom convention (within the meaning of the International Tax Agreements Act 1953 ); or
(b) a corresponding provision of another * international tax agreement.