TP Minds Australia 2024: Conference highlights

We were pleased to be the lead sponsor for this year’s TP Minds Australia 2024 conference in Sydney, and to have the opportunity to share different perspectives that are shaping the current and future landscape of transfer pricing and international tax more broadly.  

Each year, TP Minds brings together transfer pricing professionals from across Australia and beyond, offering a unique opportunity to gain valuable insights from a variety of leading industry experts, including keynote speakers and policy makers from the United Nations, ATO, OECD and International Monetary Fund.   

TP Minds workshops and conference  

As a precursor to the TP Minds conference, BDO hosted two practical workshop sessions that included case studies covering ‘BEPS Pillar 1 Amount B - Simplified and Streamlined Approach’ and ‘Transfer Pricing Documentation: Overview of the types of transfer pricing documentation and the level of detail required’.   

Conference day one – Chaired by Joel Phillips, BDO Partner, Transfer Pricing   

Day one of the conference started with keynote speeches from Rebecca Saint of the ATO and Melinda Brown of the OECD. Attendees gained valuable insights into the ATO’s activity and key focus areas, which were uniquely contrasted with the insights provided from an OECD perspective that have broader global considerations.  

The keynote speakers were followed up by various panel discussions covering key topics, including intellectual property (IP) migration and planning, intra-group financing and technology, including artificial intelligence (AI).  

We also had the honour of hearing from John De Wijn AM KC, who explored the ramifications of recent court decisions including Pepsi Co.  

Conference day two – Chaired by Zara Ritchie, BDO National Lead Partner, Transfer Pricing

Day two of the conference included an overview of recent developments across the world and an ATO discussion on their compliance programs, in particular the ATO Top 1,000 and Next 5,000 reviews.  

A panel of industry experts discussed the importance of evidence in managing and defending disputes both in Australia and internationally. This was followed by a discussion on handling the increasing transparency measures in Australia and globally.  

Tom Ewigleben, leader of the BDO’s APAC Global Value Chain practice, discussed optimising the Global Value Chain for multinational enterprises through small changes or major restructures.  

The conference concluded with a discussion on BEPS Pillar 2 and industry experiences in preparing for upcoming changes. 

Key insights from the 2024 TP Minds conference  

This year’s conference highlighted that the transfer pricing landscape continues to evolve both in Australia and across the world. The diverse perspectives and competing interests of developed and developing nations adds complexity to the efforts of policymakers to achieve an equitable and simpler framework for taxpayers to manage their transfer pricing arrangements.   

The following provides a summary of key insights gained from this year’s TP Minds Australia:  

Transfer pricing is a key ATO focus despite record tax collection in 2024

The ATO reported a record year for tax collection, mainly attributed to commodity prices. In 2024, oil and gas companies, which had not previously contributed significant taxes, were among the highest taxpayers in Australia. 

Despite positive results in 2024, the ATO remains aware that Australia is a high tax jurisdiction, raising the risk of profit shifting through transfer pricing. As a result, transfer pricing stays a primary focus, with at least 100 audits in progress at any given time and a continued focus on increasing its transparency measures - the ATO is particularly concerned with the potential mischaracterisation of transactions, inbound supply chain arrangements, marketing hubs and intra-group financing. 

‘Concepts of a plan’ to practical implementation of the OECD's Two-Pillar Framework

Over the past couple of years, the OECD’s Two-Pillar Solution has progressed from theoretical concepts to a detailed framework ready for practical implementation and participation by countries part of the inclusive framework.   

The Two-Pillar Framework is being operationalised in various countries, including Australia with respect to Pillar 2 and the APAC region is expected to follow suit. Practical challenges lie within the detail, including the tensions with domestic legislation and interaction with tax incentives, as well as dispute resolution mechanisms that are currently being considered.  

Context is key to Australia’s position on Amount B of Pillar 1

The ATO noted that the adoption of Amount B of Pillar 1 will be a decision for the legislators and policy makers in government. The ATO however, noted that context was important and that the intention behind Amount B was to provide a simplified and streamlined approach for low-capacity jurisdictions and that Australia is a high-capacity jurisdiction with sufficient information on comparable company data.   

Tax planning akin to a kid’s party - the child seeking the largest balloon often goes home empty-handed when it inevitably bursts

John De Wijn AM KC spoke to the impact of the recent court decisions shaping the transfer pricing landscape in Australia. The insights shared at the conference warned that over-inflated tax planning or transfer pricing arrangements can lead to adverse outcomes and that moderation is key for long term effective planning.  

He emphasised the importance of incorporating insights from industry experts who understand commercial realities. Ensuring that agreements reflect actual market conditions is crucial, as demonstrated in the Glencore decision. What may be apparent in the commercial sector might not be evident during court proceedings, thereby necessitating expert evidence. 

Time is finite – how AI can assist in streamlining transfer pricing operations

Panellists emphasised the need for harmonising policy, governance, and technology, with a focus on AI’s role. While the way forward and the optimal level of AI integration remains unknown, the conversation was underscored by the transformative potential of AI in simplifying business operations, including recurring tax calculations, preparation of transfer pricing documentation, and note-taking.  

Decision Impact Statement & PCG post Singtel decision

The ATO has noted that it intends to release a Decision Impact Statement in early 2025 in relation to the Singtel court decision. They also noted the release of a practical compliance guideline that will be bespoke to the relevant facts and circumstances of the taxpayer (i.e. not guiding taxpayers in the form of a traffic light system).   

ATO Top 1,000 and Next 5,000

Key observations from the ATO’s Top 1,000 and Next 5,000 reviews were discussed. As of June 2024, high assurance ratings increased from 24 per cent to 34 per cent at the second review with improvements seen following supplementary governance guidance released in 2022. The most common pitfall identified by the ATO was insufficient contemporaneous documentation and lack of appropriate corporate governance (i.e. addressing the risks identified during previous reviews).   

For the Next 5000, the ATO provides continued one-to-one attention, focusing on the key risks highlighted above.  

Transparency measures

A panel that comprised of advisers and industry discussed the ever-increasing compliance burden placed on taxpayers. Panel members highlighted the potential disconnect between the effort/resourcing required to comply with these measures and the overall benefit provided to the community via these transparency measures. The discussion underscored the critical role of preparation and proactive management in navigating the complexities of tax transparency. 

Optimising global value chains

As globalisation evolves, we are witnessing shifts in how global value chains are structured. For example, companies are reassessing their global strategies, and moving towards more regionalised/diversified global value chains to ensure resilience and reduced dependency on single points. Whilst commercial benefits and considerations are fundamental, tax and transfer pricing play a pivotal role in ensuring that the commercial benefits and considerations are aligned with tax and transfer pricing regulations across countries to unlock savings and mitigate risk. 

Contrasting revenue authorities across the world

Panellists discussed dealing with revenue authorities and defending transfer pricing positions. Comparing the tax authorities of various countries with Australia, the panellists identified the main concern to be tax avoidance structures and taxpayer behaviour, with reviews and audit streams used to identify these risks and potential tax leakages. Developed and developing nations will have their own perspectives and approaches that will need to be managed and balanced in developing and implementing a multinational’s transfer pricing policies.  

With each revenue authority having a different focus and lens, and the ever increasing transparency measures, maintaining consistent messaging is crucial when dealing with different revenue authorities. To mitigate challenges, it is imperative to maintain thorough documentation, provide precise answers and engage local advisers to help avoid further queries. 

Looking forward 

TP Minds Australia 2024 provided invaluable insights into the current landscape of transfer pricing. The discussions highlighted the importance of staying abreast of regulatory changes and adopting proactive strategies to navigate the complexities of the global tax environment.  

We enjoyed meeting with transfer pricing leaders from across the country, sharing insights and having in-depth discussions about the topics that matter to entities that operate across multiple jurisdictions.  

How BDO can help 

Our team of experts provide services to clients of all sizes. We provide a range of transfer pricing services, including compliance, audit defence, planning, controversy/dispute resolution and benchmarking. If you have any questions about any of the topics discussed in this article, or would like further information, contact our transfer pricing advisers.