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  • Hybrid Mismatch Rules receive royal assent

    On 24 August 2018 the Treasury Laws Amendment (Tax Integrity and Other Measures No. 2) Act 2018 (the Act) received royal assent. Schedules 1 and 2 of the Act introduce new Division 832 of the ITAA 1997 and the necessary amendments to give effect to the OECD Hybrid mismatch rules.

    The rules are intended to deter the use of certain hybrid arrangements that exploit differences in the tax treatment of an entity or financial instrument under the income tax laws of two or more countries, resulting in double non-taxation or long term tax deferral.

    The rules also contain a targeted integrity provision that applies to certain deductible interest payments (or payments under a derivative), made to an interposed foreign entity where the rate of foreign income tax on the payment is 10% or less.

    The rules have application to income years commencing on or after 1 January 2019 and to certain payments made after 1 January 2019. Limited transitional arrangements that impact frankable distributions also apply to additional Tier 1 regulatory capital issued by banks or insurance companies.

    In addition, while the structured imported mismatch rule will apply to income years commencing on or after 1 January 2019, the direct and indirect imported mismatch rules will be delayed to income years commencing on or after 1 January 2020 (to align with the EU introduction of the hybrid mismatch rules).

    The enactment of the rules with a deferred date is intended to allow taxpayers time to review their existing hybrid arrangements and unwind or restructure out of such arrangements in advance of the rules, if they choose.

    We will be issuing a range of guidance products to support taxpayers impacted by these amendments. To provide greater certainty to taxpayers seeking to restructure out of hybrid arrangements we have already issued draft practical compliance guideline (PCG) 2018/D4 Part IVA of the Income Tax Assessment Act 1936 and Restructures of hybrid mismatch Arrangements.

    More information

    Treasury Laws Amendment (Tax Integrity and Other Measures No. 2) Act 2018External Link

    If you have any questions or require further information on the rules please visit the hybrid mismatch page on our website.

    Last modified: 05 Sep 2018QC 56755