Contact: Petros Kosmopoulos
Corporate Affairs & Communications
Deloitte
Tel : +61 (0) 3 9208 7621
Mobile: 0407 000 926

Multi-national companies currently experiencing genuine economic losses should not be deterred from attributing them to their Australian operations where circumstances warrant, according to professional services firm Deloitte.

The ATO late last week released Taxpayer Alert TA 2008/18 ‘Arrangements to shift business losses into Australian branches or resident entities’. It warns taxpayers against aggressively or “inappropriately” shifting losses from overseas operations into Australia.

Soulla McFall, Deloitte Transfer Pricing partner, said in the current economic environment with devaluing assets and profit downturns, it is not surprising the ATO is on the front foot trying to protect its revenue base.

“The Taxpayer Alert notes that the arrangements of concern are likely to involve ‘non-arm’s length’ transactions. However, where the attribution of losses into Australia is arm’s length and legitimately allowed under the Transfer Pricing rules, taxpayers have nothing to fear,” Ms McFall said. 

“This will often be a facts based analysis looking at which entity or jurisdiction performs the functions, bears the risks or owns the assets associated with the loss.

“This type of analysis is commonly used in transfer pricing to attribute profits to the right entity.  The attribution of losses should be no different, fair share of tax in the good times, fair share of losses in the bad.

“It’s an all-important analysis for multi-national companies suffering genuine losses as it ensures that the right tax outcome is achieved,” Ms McFall concluded.

Soulla McFall
Tax Partner
Deloitte
Tel: + 61 (0) 3 9208 7814