Australia - Local Requirements

Source: 

• Tax Laws Amendment (Countering Tax Avoidance and Multinational Profit Shifting) Act 2013, introducing Subdivisions 815-B, 815-C, 815-D, and 815-E of the Income Tax Assessment Act 1997 (ITAA 1997)
• Taxation Administration Act 1953 (TAA 1953), Schedule 1, Subdivision 284-E
• Taxation Ruling TR 2014/8
• ATO Local File/Master File 2025 Guidance (published 23 December 2024)

Summary of local requirements 

Strict Format: Australia prescribes a specific electronic submission format. All Local File and Master File lodgments must use the ATO's Local File/Master File (LCMSF) XML Schema Version 4.0 (V 4.0), lodged electronically

Language: English

To download the legislation in the original language, go to:

• https://cdn.aibidia.com/localization/Australia_Guidance_2025.pdf

 

Short Form Local File

1.	Main business lines or functions and key competitors Number of main business lines or functions. Description of each main business line or function. For each above business line/function business strategies employed extent of overlap with other main business lines/functions key competitors.
2.	Organisational reporting structures and overseas reporting arrangements Whether you had any personnel employed in your operations effectively reporting to overseas personnel. (Yes/No) If No, attach a diagram of your organisational structure and move to next reporting section. If Yes, provide name, job title and employing entity details (including TFN or ABN) for your reporting personnel number of different individual overseas personnel to whom your personnel reported name, job title, residency, principal office location and employing entity details for overseas personnel description of function/activities for which reporting occurred commencement/cessation dates, if this reporting commenced or ceased during the income year a diagram of your organisational structure (as an attachment).
3.	Restructures (including change in related party financing) and intangibles arrangements Whether you had any restructure (including any change in related party financing), or new arrangement involving transfer, licence or creation of intangibles (intangibles arrangement). (Yes/No) If No, reporting section completed. If Yes, provide code (high level type) and description for restructure/arrangement for intangibles arrangement, code for types of intangibles involved anticipated Australian tax impact (including high level code) and global tax impact of restructure/arrangement commercial context and impact of restructure/arrangement code (based on IDS Q17 Appendix 11 codes) for total capital value of restructure/arrangement number of steps in restructure/arrangement for each step date code (high level type) and description number of parties to the step name of parties if the party is an international related party or Australian constituent entity, residency/branch details (if applicable) if the party is an Australian constituent entity, TFN or ABN details of any connected change in transfer pricing functional characterisation the step plan (if applicable, as an attachment).

Recommendations for Short Form Local File:

Regarding content requirements and format/structural requirements:

The Short Form Local File is a structured, field-by-field disclosure lodged via the LCMSF XML Schema V 4.0 MST, which is not a format natively generated by TPDoc. 

We recommend contacting the Aibidia support team to assist with the preparation and lodgment of the Short Form Local File in the prescribed LCMSF XML Schema V 4.0 format.

Local File

The Local File applies to reporting periods starting on or after 1 January 2024 and consists of the Short Form Local File (described above) plus two additional parts covering controlled transactions and financial information:

Local File - Part A	Provide the following information for all IRPD transactions/RAS for the income year: Australian counterparty name, TFN and ABN name of the non-resident IRP counterparty country of tax residence of the non-resident IRP counterparty country of permanent establishment (PE) of non-resident IRP counterparty – only if the IRP counterparty entered into the IRPD transaction/RAS in the course of its business operations through its PE in a different country to its country of tax residence transaction category transaction IDs for related or directly connected IRPD transactions consideration paid or received (of a capital nature for Australian income tax purposes) expenditure/revenue (of a non-capital nature for Australian income tax purposes) average balance of debt interests issued (Inbound Borrowings)/debt interests held (Outbound Loans) – only if transaction/RAS is IRPD debt interests or IRPD Foreign currency deferred payment arrangements capitalised interest deducted/returned – only if transaction/RAS is IRPD debt interests or IRPD Foreign currency deferred payment arrangements whether the debt interest (including borrowing/loan) is interest-free – only if transaction/RAS is IRPD debt interests or IRPD Foreign currency deferred payment arrangements the book value of transferred debts for IRPD debt factoring or debt securitisation transactions foreign currency gains returned or foreign currency losses deducted and the foreign currency involved whether there was a deferred foreign currency payment arrangement for the IRPD transaction/RAS and the foreign currency involved the transfer pricing method or capital asset pricing method relied on for the IRPD transaction/RAS the transfer pricing documentation code or STPRK code for the IRPD transaction/RAS if the reporting entity is a bank or OBU, whether specific reporting rules for financial transactions apply to the IRPD transaction/RAS if the reporting entity is an OBU, whether the IRPD transaction/RAS is an OB transaction if the IRPD transaction/RAS is covered by the exclusions list.
Local File - Part B	For each IRPD transaction/RAS not covered by the exclusions list, provide the following in Part B of the local file: the transfer pricing method relied on for the transaction by the IRP (or an indication that the reporting entity was not able to obtain this from the IRP counterparty) an indication of whether there is a written agreement or amendment agreement, and, if there is, whether the agreement has been previously provided to us. If it has been previously provided, we require the title of the agreement to enable ATO identification. a copy of the agreement (unless previously provided to us) an indication whether there are any foreign advance pricing arrangement (APAs) or rulings provided by another jurisdiction in relation to an agreement, and if so, whether the APAs or rulings have been previously provided to us. Where these have been previously provided, we require the titles of the APA or ruling to enable ATO identification.
Financial statements	Highest quality financial accounts for the Australian reporting entity provided separately (if not provided as an attachment to Part B)

Recommendations for Local File:

Regarding content requirements and format/structural requirements:

The Local File (Part A and Part B) requires highly specific, structured, and field-by-field disclosures in the LCMSF XML Schema V 4.0 format, which is not a format natively generated by TPDoc. 

We recommend contacting the Aibidia support team to assist with the preparation and lodgment of the Local File in the prescribed LCMSF XML Schema V 4.0 format.

Transfer Pricing Documentation for having a reasonably arguable position (i.e., RAP)

Subdivision 284-E of Schedule 1 to the TAA 1953, together with TR 2014/8, sets out the records an entity must maintain to establish a Reasonably Arguable Position (RAP) for its transfer pricing treatment, and thereby mitigate administrative penalties. The records must:

(a)	Be prepared before the time the entity lodges its income tax return for the relevant income year
(b)	Be in English, or readily accessible and convertible into English
(c)	Explain the particular way in which Subdivision 815-B (arm's length principle for cross-border conditions between entities) or 815-C (arm's length principle for permanent establishments) of the ITAA 1997 applies, or does not apply, to the matter
(d)	Explain why the application of Subdivision 815-B or 815-C in that particular way best achieves consistency with the prescribed guidance material

Further, subsection 284-255(2) specifies that the records must allow each of the following to be readily ascertained:

(a)	The arm's length conditions relevant to the matter (or matters)
(b)	The particulars of the method used and comparable circumstances relevant to identifying those arm's length conditions
(c)	Where records explain the application (as opposed to the non-application) of Subdivision 815-B or 815-C of the ITAA 1997, the records must also explain the result that the application in that particular way has as compared to the non-application
(d)	For Subdivision 815-B of the ITAA 1997 - the actual conditions relevant to the matter (or matters)
(e)	For Subdivision 815-C of the ITAA 1997 - the actual profits and the arm's length profits as well as the particulars of the activities and circumstances to the extent they are relevant to the matter (or matters)

TR 2014/8 recommends that taxpayers address five key questions when preparing their documentation:

1.	What are the actual conditions that are relevant to the matter (or matters)?
2.	What are the comparable circumstances relevant to identifying the arm's length conditions?
3.	What are the particulars of the methods used to identify the arm's length conditions?
4.	What are the arm's length conditions and is/was the transfer pricing treatment appropriate?
5.	Have any material changes and updates been identified and documented?

Recommendations for Transfer Pricing Documentation:

Regarding content requirements:

Australia's RAP documentation requirements under Subdivision 284-E and TR 2014/8 are substantially aligned with the OECD BEPS Action 13 Local File content. TPDoc's standard Local File functionality covers the core substance requirements, including functional analysis, method selection and application, comparables analysis and adjustments, and arm's length conclusions.

• Actual Conditions:

  Australia requires explicit documentation of the actual conditions relevant to the controlled transaction, distinguishing these from the arm's length conditions.

  We recommend documenting the actual contractual terms and pricing conditions in the Contractual Terms and Description subsections of the corresponding Reporting Level, and comparing these explicitly to the arm's length outcome in the Reason for concluding that transaction is at arm's length column in the Arm's Length Validations tab of the Economic Analysis section.

• Contemporaneous Preparation:

  Australia requires that RAP documentation be completed before the entity lodges its income tax return for the relevant income year.

  We recommend ensuring all TPDoc documentation is finalised and locked prior to the Australian income tax return filing date, and saving a dated, version-controlled export from TPDoc as evidence of contemporaneous preparation.

Regarding format/structural requirements:

There is no prescribed format for RAP documentation. It must be in English (or readily convertible into English) and maintained contemporaneously for potential ATO review.

We recommend preparing the RAP documentation using TPDoc's standard Local File functionality. Ensure the documentation is completed and finalised before lodging the Australian income tax return for the relevant income year.

 

 

Master File

Australia's Master File content requirements are consistent with the OECD BEPS Action 13 Annex I and Annex III of Chapter V of the 2017 OECD Guidelines. The Master File must be lodged electronically via the LCMSF Schema V 4.0.

Recommendations for Master File:

Regarding content requirements:

Australia's Master File content requirements are closely aligned with the OECD BEPS Action 13 Master File structure. TPDoc's standard Master File functionality covers all required sections. No additional documentation beyond what is standard in TPDoc is required from a content perspective.

Regarding format/structural requirements:

Australia requires the Master File to be lodged electronically using the ATO's LCMSF XML Schema Version 4.0 (V 4.0), which is not a format natively generated by TPDoc. 

We recommend preparing the Master File content using TPDoc's standard Master File functionality, and then contacting the Aibidia support team to assist with the conversion and lodgment of the Master File in the prescribed LCMSF XML Schema V 4.0 format.