Transfer Pricing Implications of Business Restructuring

The Australian Taxation Office ("ATO") recently issued draft Taxation Ruling TR 2010/D2 (the "Draft Ruling") dealing with the application of the transfer pricing provisions to business restructuring by multinational enterprises ("MNEs"). The purpose of this publication is to provide practical guidance to document a business restructure from a transfer pricing standpoint.

A business restructuring can occur for various commercial reasons. It may be in response to competitive pressures, business opportunities, market conditions, cost pressures and changing operating and regulatory environments. As recognised in paragraph 64 of the Draft Ruling, the alternative to restructuring may be to operate less profitably, at a loss or going out of business.