Federal Court Rejects Commissioner’s Attempt To Use Transactional Net Margin Method

Abstract

In SNF (Australia) Pty Ltd v. Commissioner of Taxation, the Federal Court has held that the assessable income of SNF (Australia) Pty Ltd should not have been increased pursuant to the transfer pricing rules in Div. 13 of the Income Tax Assessment Act 1936. This decision provides a practical example of an Australian court's application of transfer pricing methodologies to determine whether prices charged by related parties were “arm’s length consideration” for Div. 13 purposes.