James Maston - Transfer Pricing Advice

Your advisor

James Maston - Senior Consultant

Transfer pricing concerns transactions between two entities that are related or under common ownership. Adept tax accountants who specialise in this area should know not only how to avoid sanction for failing to meet arm’s length conditions, but also how to protect your profits with a solid transfer pricing methods.

Any transaction you make between your Australian entity and overseas party will be affected by these transfer pricing laws – sale of goods, services, loans, royalties, and other dealings.

As the ATO steps up its scrutiny on transfer pricing, it will monitor, regulate, and adjust the prices of your cross-border transactions to make sure they meet arm’s length principles. Ensuing ATO tax penalties can impact your bottom line. The ATO can also adjust the transfer pricing in Australia of your international transactions, which is why your tax accountant must manage the complex factors that go into measuring this principle on a case by case basis.

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What is the arm’s length principle?

Arms length principal transfer pricing infographic
Kevin Bae - Transfer Pricing Advice

Your advisor

Kevin Bae - CEO/Managing Director

Calibre’s transfer pricing solutions aim to protect your profit margins

Prices fluctuate and change. Currency exchanges influence value, and many factors influence margins. This means it is difficult for tax accountants to achieve absolute precision when determining whether or not a transfer pricing transaction meets the arm’s length principle. Your goal should be not only to comply, but also protect your profit margins.

How the ATO removes your transfer pricing benefits: an example

It is determined that Simon and Sarah purchase t-shirts at $20 per unit from their Vietnamese partner and sell them for $50. So, their profit is 30$ per item.

The Vietnamese partner is also selling these same t-shirts to unrelated parties for $10 per unit.

It is determined, therefore, that Sarah and Simon receive a transfer pricing benefit of $10. They have paid $10 more per item than arm’s length parties.

Simon and Sarah will be taxed on a profit based on the arm’s length price, not the actual transaction price. So they will pay tax on $40 not $30; they will pay more tax.

This is a simplified example of transfer pricing. The fact is, an expert tax accountant can justify the difference in transfer pricing. Calibre’s tax accountants bring their expertise to bear on each case. Interpretations, specifications, clarifications, and exemptions - these all apply to each and every transfer pricing transaction you make between related entities.

Do you have the right transfer pricing advice?

“Since our property development was largely financed from overseas, it meant our transfer pricing methods needed to meet the scrutiny of the ATO. Without the preparation and careful work of Calibre’s staff, we would likely not have been prepared for the ATO audit. Thanks to them, we demonstrated that our transfer pricing was compliant and we escaped hefty penalties.” Local Property Developer

Calibre’s tax accountants understand that precision matters when coordinating transfer pricing methods. In fact, our transfer pricing methods can help you better understand how much money your business is actually making overall across two or more different tax domains, and so can improve your business as a whole.

Contact us to avoid loss. Failure to meet arm’s length principles and poor documentation could lead to an ATO audit and tax penalties against poor transfer pricing methods. Calibre Business Advisory manages transfer pricing methods, prepares documentation, represents you to the ATO, and we have the legal, accounting, and strategic skills you need to protect your profits.

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