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Preparing for the reforms to LIBOR-type Interest Rate Benchmarks

Posted By Tax & Legal  

In our previous article we discussed the essential things you needed to know about how reforms to inter-bank offered rates (IBOR) could impact current company financial arrangements.


Today we will cover what can you do to prepare and plan for the change to your finance arrangements.


1. Assess
  • Review your legacy contracts of any finance arrangements.
  • Access whether impacted, and whether there are the any fall back positions/default setting in the agreement that will apply.


2. Amend

Discuss with other party to arrangement and your professional tax/transfer pricing advisor the following:

  • level of amendment potentially required, 
  • which RFR to apply, 
  • the fall back positions to be used, 
  • how to mitigate any implication from the amendments.


3. Document
  • Ensure all considerations and amendments are supported by robust evidence demonstrating the amended financial arrangement is consistent with the arm’s length principle.
  • Use this evidence to form part of the contemporaneous compliant transfer pricing documentation for the arrangement.


The ATO recently released a discussion paper on the common tax consequences and transfer pricing considerations that could result from these reforms. This was to facilitate community consultation toward the development of a practical compliance guide due later in the year. 

You can read the full ATO discussion paper here