Overview
Transfer pricing rules apply when Australian businesses transact with related overseas entities. The ATO requires these transactions to be priced on an “arm’s length” basis—meaning they reflect what unrelated parties would pay.
In simple terms, businesses must ensure internal pricing between related entities is fair and properly documented to prevent profit shifting and tax avoidance.
Compliance Requirements
Businesses generally need to:
- apply an accepted transfer pricing method,
- keep records explaining how prices were set,
- and maintain evidence supporting intercompany transactions.
The ATO also provides simplified record-keeping options for smaller or less complex businesses, although core compliance obligations still apply.
Key Points for Businesses
- Transfer pricing applies to cross-border related-party dealings.
- Documentation is required, even under simplified rules.
- The ATO can review and adjust pricing if it is not arm’s length.
- Proper records reduce audit and penalty risk.
Practical Takeaway
Transfer pricing compliance is essential for any business with offshore related parties. While simplified options may reduce paperwork, businesses must still ensure pricing is fair, consistent, and properly supported.
Small Business CGT Concessions in Australia: A Simple Overview
The small business CGT concessions can significantly reduce tax when selling business assets, particularly for retirement or business succession.
Eligibility
To qualify, a business must generally meet one of the key tests, including:
- turnover under the small business threshold, or
- net asset value under the statutory limit, and
- the asset must have been actively used in the business.
Main Concessions
- 15-Year Exemption: full CGT exemption in certain retirement or incapacity cases.
- 50% Active Asset Reduction: reduces the capital gain by half.
- Retirement Exemption: up to $500,000 tax-free.
- Rollover Relief: defers tax if reinvesting in replacement assets.
Key Takeaways
- Concessions can significantly reduce or eliminate CGT.
- Eligibility must be assessed before selling assets.
- Planning is essential to maximise benefits.