A foreign resident entity has a branch in Australia which has assessable income for the relevant income year.
The foreign resident entity has: a. accumulated losses, b. assets with embedded, but not yet realised, losses ("loss assets", for example, a book of [bad] debts), or c. a liability to pay a third party (the "third party liability").
The foreign resident entity arranges to inappropriately attribute to the Australian branch: a. some or all of the losses from foreign operations, b. loss assets at an inflated price (i.e. by not properly accounting for the decrease in value arising from the embedded losses when it is attributed to the Australian branch), or c. the third party liability without attributing to the branch adequate compensation for the value of the liability assumed by the branch. Note: This is likely to involve either an international agreement between related parties that are not dealing at arm's length or profits and circumstances that would not reasonably be expected if the branch were a distinct and separate entity dealing at arm's length with the entity.
As a result of the arrangements, greater deductions for losses are sought in Australia by the Australian branch or subsidiary.
Similar tax outcomes may be sought by an Australian resident entity with a foreign branch failing to properly attribute to that branch relevant losses, loss assets or third party liabilities.
A foreign resident entity has an Australian resident associate (including a subsidiary member of a multiple entry consolidated group) with assessable income for the relevant income year.
The foreign resident entity has: a. assets with embedded, but not yet realised, losses ("loss assets", for example, a book of [bad] debts), or b. a liability to pay a third party (the "third party liability").
The foreign resident entity and the Australian resident associate arrange to inappropriately transfer: a. loss assets to the Australian resident entity at an inflated price (i.e. by not properly accounting for the decrease in value arising from the embedded losses), or b. the third party liability to the Australian resident entity without receiving proper compensation for the value of the liability assumed. Note: This is likely to involve either an international agreement between related parties that are not dealing at arm's length.
As a result of the arrangements, greater deductions for losses are sought in Australia by the Australian resident entity.