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The Administrative Review Tribunal on April 30, 2025, inÌý rejected the tax authority’s contention that the taxpayer’s sales of alumina to a third-party Bahrain smelter were not priced within the an arm’s length range.

The tribunal found that the taxpayer’s pricing arrangements using both market tonnage and formula tonnage were supported by a wide range of different contractual and pricing mechanisms used in the market, even though there may have been other pricing bases observable in the broader market that the tax authority may have preferred (i.e., focusing on market tonnage).

The tribunal also found that the tax authority’s assumption that annual price reviews were required was inconsistent with the taxpayer’s long-term contracts.

ÀÖÓ㣨Leyu£©ÌåÓý¹ÙÍø observation

Although the case involved the application of Australia's prior transfer pricing regime in Division 13 of the Income Tax Assessment Act 1936, many of the themes of the decision would also apply in the context of Australia's current transfer pricing rules in Subdivision 815-B of the Income Tax Assessment Act 1997.

It is notable that the tax authority sought to use the transfer pricing provisions to challenge the taxpayer’s pricing of transactions involving unrelated parties, which is a reminder that the transfer pricing rules under both Division 13 and the Subdivision 815-B may be applied to transactions with third parties.
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For more information, contact a ÀÖÓ㣨Leyu£©ÌåÓý¹ÙÍø tax professional in Australia:

Sam van Berkel |Ìýsvanberkel@kpmg.com.au

Glen Hutchings |Ìýghutchings1@kpmg.com.au

Kristie Schubert |Ìýkschubert3@kpmg.com.au

Jeremy Capes |Ìýjeremycapes@kpmg.com.au