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Transfer Pricing Cases of 2021—Australia

Jan. 18, 2022, 9:45 AM

In this regular review of the key transfer pricing cases from last year, we take a look at the details of the cases. In the first of three-part series, those transfer pricing cases in Australia are summarized and analyzed.

Glencore Investment Pty Ltd, High Court of Australia (Case No. [2021] Trans 98)

On May 20, 2021, the High Court of Australia announced that it refused to hear the appeal by the Australian Tax Office, or ATO, against the Nov. 6, 2020, decision of the Federal Court of Australia in the case of Glencore Investments Pty Ltd (see Transfer Pricing Cases of 2020).

On Sept. 28, 2021, the ATO released a Decision Impact Statement, explaining that it would continue to consider all of the evidence when deciding what an arm’s length price should be. In particular, while an expert opinion was relied upon by the Federal Court, the ATO continues to believe that the group’s policies and risk appetite were relevant factors that were not properly considered—and which may have led the parties to agree to a different contract. In other words, an expert may state that the actual agreement was a feasible one, but it is necessary to move on to the next step and ask whether it is the one that would have been entered into by the parties in question, and in the conditions at that time.

Singapore Telecom Australia Investments Pty Ltd, Federal Court of Australia (Case No. [2021] FCA 1597)

On Dec. 17, 2021, the Federal Court of Australia published its decision in the case of Singapore Telecom Australia Investments Pty Ltd. The taxpayer had borrowed from a Singapore company in the same group by issuing a loan note which was amended three times, the first two times changing the interest rate with effect from the date of the original agreement and third setting the interest rate at 13.2575%. The tax administration denied interest deductions in respect of four years of income.

The court upheld the assessment issued by the tax administration and dismissed the appeal by the taxpayer. Firstly, the
taxpayer’s benchmarking of the effective interest rate against Debt Capital Market (DCM) bond yields was not accepted by the court because the benchmarks were not sufficiently comparable, the terms of the loan note were not the same as the terms of a typical DCM bond issue, and benchmarking of the effective outcome was not the same as confirming that the agreed-upon terms were those which would have been agreed on by independent parties at the time.

The court ruled that in an arm’s length agreement, a parental guarantee would have been provided and that no amendment of the agreement would have been accepted. In doing so, it relied on Chevron Australia Holdings Pty Ltd (see Transfer Pricing Cases of 2017) and Glencore Investment Pty Ltd.


The decisions in the transfer pricing cases of 2021 suggest the following themes:

  • Comparability adjustments are required when using an internal CUP such as a bank loan as a benchmark for a subordinated and/or unsecured loan unless it can be shown that there was no market for such loans;
  • The arm’s length price includes the terms and conditions, but the economic factors that are specific to the transaction should determine which terms and conditions are imputed for any particular related party transaction;
  • Long-term losses can be justified by economic factors;
  • The full arm’s length range can be used unless the observations outside the interquartile range have been shown to be unreliable; and
  • Deviations from the arm’s length range (e.g. interest-free loans) can be justified by the economic considerations of the parties.

This article does not necessarily reflect the opinion of The Bureau of National Affairs, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Danny Beeton is of counsel in the London and Luxembourg offices of Arendt & Medernach.

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To contact the reporter on this story: Kelly Phillips Erb in Washington at