background image

Australia Clarifies Local File Requirements with High Level Design — Orbitax Tax News & Alerts

On 7 July 2016, the Australian Taxation Office issued a release on the high level design for the new Local file requirements for significant global entities, which include entities that are part of an MNE group meeting an AUD 1 billion revenue threshold in the previous year. The Local file requirements and content are based on BEPS Action 13 and include standard Local file and a short form version. The standard Local file includes details of the reporting entity and controlled transactions, while the short form includes only details of the reporting entity.

The high level design sets out the criteria for filing the standard or short form Local file, the information content to be included in the Local file ({News-2016-06-14/A/2- previous coverage}), and an exclusion list of agreements that do not need to be included in the Local file.

Short Form Criteria

In order to qualify for the short form Local file, the reporting entity must meet at least one of the following criteria:

  • The aggregate value of its international related party dealing (IRPDs) is less than AUD 2 million and it has no IRPDs on the Short Form Exceptions List;
  • It meets the Simplified Transfer Pricing Record Keeping (STPRK) criteria for Small Taxpayers (revenue not exceeding AUD 25 million and other conditions) and it has no IRPDs on the Short Form Exceptions List; or
  • It meets the STPRK criteria for Materiality (IRPDs not exceeding 2.5% of revenue and other conditions) and it has no IRPDs on the Short Form Exceptions List.

The Short Form Exceptions List includes:

  • Any derivative including without limitation any swap, forward, future or option in respect of values determined in connection with interest rates, currency, commodities or other assets;
  • Any legal or equitable assignment of trademark, patent, design, copyright, other intellectual property or similar property or rights, or any part thereof;
  • Any license or other grant of use or right to use a trademark, patent, design, copyright, other intellectual property, secret formula or process or similar property or rights; and
  • IRPDs of a capital nature.

Exclusion List

The following do not need to be included in the Local file, subject to certain conditions:

  • Agreements relating to transactions eligible for Simplified Transfer Pricing Record Keeping;
  • Reimbursement under Employee Secondment Agreements;
  • Low Value / Low Risk Service Agreements;
  • Low Value/ Low Risk Sale and Purchase Tangible Trading Stock Agreements; and
  • Issue of ordinary shares

Click the following links for the Local File – High Level Design for more information.