ATO tightens transfer pricing reporting
ATO tightens transfer pricing reporting
The Australian Taxation Office (ATO) has introduced sweeping changes to the Short Form Local File (SFLF) reporting obligations, with new guidance now effective for income years commencing on or after 1 January 2024. These updates aim to address the ATO’s longstanding concerns over the SFLF’s ability to detect high-risk tax structures and profit-shifting arrangements.
BDO national leader of transfer pricing, Zara Ritchie said the most significant development is the elimination of the automatic exemption for entities without cross-border transactions, expanding the scope of compliance and impacting a wider range of Australian taxpayers.
Additionally, the ATO has integrated SFLF reporting into Local File Parts A and B under the new LCMSF Schema Version 4.0, significantly increasing the depth and complexity of information required.
“While the intent behind these changes is to enhance transparency and consistency, the new requirements will create a substantial compliance burden—particularly for groups with offshore operations or recent restructures,” said Zara.
“The level of detail expected around business restructures, intangible assets, and management reporting lines will require early engagement, extensive documentation, and close coordination with offshore personnel.”
The revised guidance outlines detailed disclosure obligations around significant restructures, particularly those involving intangible assets, and requires taxpayers to justify materiality and assess associated Australian tax risks.
“The reporting format now mandates granular information on organisational structure, key competitors, and strategic business lines—along with step-by-step descriptions of any restructures or transfers of intangibles,” said Zara.
“Taxpayers must prepare their 2025 Local File using the updated schema, with the first lodgement anticipated to be resource-intensive.
“Understanding the new requirements and liaising with overseas teams well in advance will be critical to ensure compliance and avoid surprises during ATO reviews.
“MNEs with a 31 December year end should already be engaging with overseas parties to ensure ready compliance with these new requirements.”
As the SFLF evolves from a simplified filing tool into a robust disclosure mechanism, Australian businesses must prioritise readiness, internal coordination, and documentation to meet the ATO’s heightened expectations.
For media enquiries:
Tate Papworth
Manager, Media
E: Tate.Papworth@bdo.com.au
Ph: 0433411189