Don Farrell (SA, Australian Labor Party, Parliamentary Secretary for Sustainability and Urban Water) Share this | Hansard source

I thank Senator Madigan for his contribution and support, and I thank all of those other senators who have spoken in respect of the Tax Laws Amendment (Cross-Border Transfer Pricing) Bill (No. 1) 2012. This bill ensures that Australia has an effective and internationally consistent transfer pricing rule. It confirms that transfer pricing rules contained in Australia's tax treaties and incorporated into our domestic law provide assessment and authority in treaty cases. These changes apply to income years commencing on or after 1 July 2004, that being the first income year following the parliament's last statement demonstrating the longstanding legislative intent that the law operate in this way. We have discussed the considerable evidence across the decades that parliament intended the treaty transfer pricing rules to operate 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 public expressed view of the law. I want to emphasise that the potential impact on taxpayers has been very carefully considered. Importantly, these provisions can only apply where a tax treaty is applicable and therefore a party affected by these measures will be able to access the treaty mechanisms designed to relieve any double taxation that could arise. Settled cases will not be opened as a result of these amendments, and the transitional rules will ensure that the penalty provisions of the income tax law apply as though this bill were never enacted. The government has engaged extensively with the business community in relation to this measure, and the measure is not wholly supported by multinationals and their advisers. Given that this is a robust integrity measure, this is not altogether unexpected.

That said, however, the bill has greatly benefited from the inclusion of some important features following the consultation by the minister. In particular, the bill clarifies the interaction between the transfer pricing and thin capitalisation rules. The bill also provides direct access to OECD guidance material in interpreting the 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 therefore commend the bill to the Senate.

Question agreed to.

Bill read second time.