Transfer Pricing Australia 2025: Key Rules & Compliance Insights

Transfer pricing is more than a tax buzzword—it’s a core issue for Australian multinationals, especially as the ATO ramps up its scrutiny in 2025. With updated guidance, sharper data analytics, and rising global tax transparency, getting transfer pricing right is now a boardroom priority. Here’s what every CFO, finance manager, and tax lead should know for the year ahead.

What Is Transfer Pricing and Why Does It Matter?

Transfer pricing refers to the prices charged on transactions between related entities within a multinational enterprise (MNE). These prices impact where profits are booked and, ultimately, how much tax is paid in each jurisdiction. The ATO’s goal: ensure Australian entities are paid or charged arm’s length prices, so taxable profits aren’t artificially shifted offshore.

In 2025, with Australia’s continued commitment to the OECD’s Base Erosion and Profit Shifting (BEPS) framework and expanded information-sharing between tax authorities, transfer pricing compliance is under a brighter spotlight than ever.

• Arm’s length principle: Australian tax law requires that intra-group transactions are priced as if they were between independent parties.

• Documentation: Robust transfer pricing documentation is not just best practice—it’s a legal requirement for many Australian businesses.

• ATO focus: The ATO is using advanced data analytics and risk models to identify high-risk transfer pricing arrangements.

Key Transfer Pricing Developments for 2025

Several policy changes and enforcement trends are shaping the transfer pricing landscape this year:

• Revised ATO guidance: The ATO updated its Practical Compliance Guidelines (PCG 2024/1) in late 2024, targeting intangibles, marketing hubs, and cross-border financing arrangements.

• Mandatory disclosure: From July 2025, large MNEs must provide detailed transfer pricing position disclosures under the expanded International Dealings Schedule (IDS).

• Public CbC reporting: Australia’s new public country-by-country (CbC) reporting regime requires disclosure of tax and economic data for each jurisdiction, adding a layer of transparency and reputational risk.

• Increased audits: The ATO has flagged transfer pricing as a top audit priority for FY25, with particular attention on digital businesses and supply chain restructuring.

For example, a global software company with its intellectual property (IP) held offshore but significant R&D and sales activity in Australia may face close ATO scrutiny to ensure profits are not inappropriately shifted to low-tax jurisdictions.

How to Strengthen Your Transfer Pricing Compliance in 2025

With the ATO’s data-driven approach and new regulatory expectations, Australian businesses should consider the following strategies:

• Refresh documentation: Ensure all transfer pricing files are up-to-date, robust, and tailored to the latest ATO guidance and your business model.

• Benchmarking: Use current, market-based comparables for pricing analysis. Outdated or generic benchmarks are a red flag for auditors.

• Substance over form: Demonstrate that key functions, risks, and assets (especially intangibles and decision-making) are genuinely located where profits are booked.

• Scenario planning: Model different economic outcomes (e.g., supply chain shocks, FX volatility) to test whether your transfer pricing approach remains arm’s length under various conditions.

• Cross-functional alignment: Involve tax, legal, finance, and commercial teams to ensure transfer pricing reflects operational reality—not just a tax calculation.

For instance, a mining company exporting commodities through a Singapore marketing hub must evidence that the hub has genuine commercial substance and is not simply a profit-shifting vehicle.

What’s at Stake: Risks and Penalties

Non-compliance with transfer pricing rules can be costly:

• Tax adjustments: The ATO can adjust taxable income, leading to higher tax liabilities and interest.

• Penalties: Administrative penalties of up to 50% of the tax shortfall may apply for reckless or intentional disregard.

• Reputational damage: Public CbC reporting and ATO enforcement actions can bring unwanted media and stakeholder attention.

Recent ATO settlements with multinationals in the tech and resources sectors—often involving hundreds of millions in back taxes—underscore the high stakes in 2025.

Conclusion: Prioritise Transfer Pricing Now

Transfer pricing is no longer a back-office compliance issue—it’s a strategic concern that can impact your tax bill, audit risk, and brand. With 2025 bringing tighter rules and more scrutiny, investing in robust transfer pricing policies, documentation, and interdepartmental collaboration is essential for every Australian multinational.