Australia: Taxpayer failed to meet burden of proof in transfer pricing dispute (Full Federal Court decision)
A Full Federal Court decision concerning burden of proof in a transfer pricing dispute involving cross-border related party financing.
The Full Federal Court on 8 March 2024 rejected the taxpayer’s appeal, holding that the taxpayer had failed to meet its burden of proof in a transfer pricing dispute involving cross-border related party financing.
The case is: Singapore Telecom Australia Investments Pty Ltd v. Commissioner of Taxation [2021] FCA 1597
In particular, the court found that arm’s length consideration must be established based on a common sense approach in developing a reliable hypothesis for the type of dealing that occurred, with due regard to the position of the taxpayer and the commercial context for the actual dealing. This necessitates a focus upon the characteristics of the dealing itself (not the subjective or special concerns of the taxpayer and other parties involved in the dealing).
KPMG observation
The decision highlights the importance of having comprehensive, relevant commercial and economic evidence to support transfer prices of related party transactions.
For more information, contact a KPMG tax professional in Australia:
Sean Madden | smadden3@kpmg.com.au
Kristie Schubert | kschubert3@kpmg.com.au