Home – New Forums Money matters Handling payments separately?

  • This topic is empty.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • #994135
    pokmo
    Member
    • Total posts: 3
    Up
    0
    ::

    Hi

    Suppose a company A Ltd takes orders from customers, manufactures goods and imports them from overseas. Could the company be divided up into a A Ltd, which only takes orders from customers, and B Ltd, which does manufacturing and importing? B would then never make a profit because A takes all the orders. If A was incorporated and controlled overseas, it wouldn’t even pay ATO at all. Is this why a few companies have a “X Finance Ltd” which only handles sales receipts?

    Thanks

    #1195356
    NickKaro
    Member
    • Total posts: 226
    Up
    0
    ::

    Possible. However there are complex “transfer pricing” rules which allow the ATO the recharacterise transactions if they are not at “arms length” and cross border.

    Also if the owners of A were AU resident, profit or dividends may be taxed in their hands here.

    Regards
    Nick

    #1195358
    pokmo
    Member
    • Total posts: 3
    Up
    0
    ::

    How is transfer pricing supposed to be determined? Is the value determined by an auditor?

    Given that the payments company is controlled and incorporated overseas, the payments processed don’t go through Australia. It is just the manufacturing company that’s controlled in Australia.

    #1195359
    NickKaro
    Member
    • Total posts: 226
    Up
    0
    ::

    If manufacturing is happening in AU and it’s not receiving a reasonable profit for the work happening here the TP provisions may apply. As mentioned they are complex but a good starting point is as follows: https://www.ato.gov.au/print-publications/international-transfer-pricing—introduction-to-concepts-and-risk-assessment/

    #1195360
    pokmo
    Member
    • Total posts: 3
    Up
    0
    ::

    It could also be the other way around, i.e. the payment company is in Australia whilst the manufacturing company is overseas. Payment processing commission is typically just 4%-5% (e.g., PayPal’s fees). So for every $1 the Australian payment company collects, $0.95 goes away to the manufacturing company. AFAIK, transfer pricing is essentially a fair price that an independent, unrelated company would charge – correct?

    #1195361
    LucasArthur
    Participant
    • Total posts: 3,171
    Up
    0
    ::

    What’s the objective here?

    Jason Ramage | Lucas Arthur Pty Ltd | E: [email protected]   P: 61 3 8324 0344    M: 61 412 244 888
Viewing 6 posts - 1 through 6 (of 6 total)
  • You must be logged in to reply to this topic.