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  • Draft LCR and PCG: OECD hybrid mismatch rules open for consultation

    We are seeking feedback on two drafts that were released for comment on 19 December 2018:

    1. Law Companion Ruling LCR 2018/D9 OECD hybrid mismatch rules - concept of structured arrangement, and
    2. Practical Compliance Guideline PCG 2018/D9 OECD hybrid mismatch rules - concept of structured arrangement.

    Division 832 of the Income Tax Assessment Act 1997 (ITAA 1997) and associated amendments implement the recommendations of the OECD regarding hybrid mismatch arrangements into Australian taxation law.

    The new term ‘structured arrangement’ in Division 832 is one of the key criteria to be satisfied for the rules to apply, broadening the potential scope of the rules beyond just related parties.

    Together, the LCR and PCG drafts provide guidance to taxpayers regarding the ATO’s view of the terms ‘structured arrangement’ and ‘party to a structured arrangement’ in section 832-210 of the ITAA 1997. This also applies to the Commissioner’s compliance approach in relation to structured arrangements.

    A principal objective of these rules is to prevent multinationals from accessing unfair tax advantages compared with their domestic competition. Historically they have done so using hybrid mismatch arrangements to 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.

    These new rules neutralise the tax effect of particular hybrid arrangements by either denying deductions or including amounts in assessable income.

    We encourage anyone with feedback on the LCR and PCG drafts to contact us at The consultation period is open until 15 February 2019.

    Last modified: 25 Jan 2019QC 57800