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In a recent case of SNF (Australia) Pty Ltd v. Commissioner of Taxation [2010] FCA 635 which dealt with a transfer pricing issue, the tax payer was successful in proving that the prices paid under the contested transactions were arm's length prices. The tax payer further proved that the Commissioner's tax assessment was excessive.


SNF traded with entities in France, China and the US by importing goods from them.
The Commissioner from the Tax Office considered that the parties to the international agreement were not trading fairly as SNF paid amounts that were greater than "arms length" consideration under sections 136AD(3) and 136AD(4) of the Income Tax Assessment Act (ITAA) 1936, which decreased SNF's taxable earnings in Australia.

The Commissioner also discovered that SNF incurred losses due to the payment of excessive amounts for products imported from related SNF entities, thereby resulting in a transfer of the profits earned offshore.

SNF contended that the related SNF entities abroad were suppliers who were involved in selling products to its independent parties.


Middeleton J upheld SNF’s appeal against the objection of the Commissioner as SNF was successful in proving that it had adopted the Comparable Uncontrolled Price method. The Federal Court therefore accepted SNF’s arguments and its evidence.


• The Tax Office is always prudent about businesses which are involved in international operations.
• Businesses need to be aware and updated about the transfer pricing policies in its state.
• The tax payer bears the burden to proof in determining the Commissioner’s assessment.
• This case provides a practical insight of the evidence that a taxpayer will need to put before a court in order to meet the burden of proof in challenging an amended assessment issue.

All businesses especially those with international transactions need to have appropriate documentation to protect their transactions as the Tax Office may amend their assessment rules from time to time.

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