David Bradbury (Lindsay, Australian Labor Party, Assistant Treasurer ) Share this | Hansard source

I thank those members who have contributed to this debate on the Tax Laws Amendment (Cross-Border Transfer Pricing) Bill (No. 1) 2012. This bill ensures that Australia has effective and internationally consistent transfer-pricing models. It confirms that transfer-pricing rules contained in Australia's tax treaties and incorporated into domestic law provide assessment authority in treaty cases. The changes in the bill will apply to income years commencing on or after 1 July 2004. That was the first income year which followed parliament's last statement demonstrating its long-held understanding that the law operates in this way. We have discussed the considerable evidence across the decades that parliament understood that treaty transfer-pricing rules have operated in addition to our unilateral transfer-pricing rules since at least 1982. The amendments contained in this bill are also entirely consistent with the Commissioner of Taxation's long-held and publicly expressed view of the law.

I emphasise that the potential impact on taxpayers has been carefully considered. Importantly, the measures in the bill can only apply where a tax treaty is applicable, and therefore a party affected by the measures will be able to access the treaty mechanisms designed to relieve any double taxation that could arise. Settled cases will not be reopened as a result of the measures in the bill, and penalties will only apply in relation to prior years to the extent that they can arise under the current law. The government has engaged extensively with the business community on this bill. The measures in the bill are not wholly supported by multinationals and their advisers—and, given that they are robust integrity measures, this was not altogether unexpected. That said, the bill has greatly benefited from the inclusion of some important features following consultation. In particular, the bill clarifies the interaction between the transfer-pricing and the thin capitalisation rules. The bill also provides direct access to OECD guidance material in interpreting rules, avoiding the need to get costly expert advice on whether such guidance may be used. This reflects the best international thinking on transfer pricing. Other provisions of the bill support these key features and ensure the provisions work and interact appropriately with the rest of the income tax law. I commend the bill to the House.

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