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  • Hybrid mismatch rules

    Enacted in 2018, the hybrid mismatch rules aim to prevent multinational companies from gaining an unfair competitive advantage by avoiding income tax or obtaining double tax benefits through hybrid mismatch arrangements. These arrangements exploit differences in the tax treatment of an entity or instrument under the laws of two or more tax jurisdictions.

    The hybrid mismatch rules apply to payments that result in hybrid mismatch outcomes such as where:

    • a payment is deductible in one jurisdiction and non-assessable in the other jurisdiction
    • one payment qualifies for a tax deduction in two jurisdictions
    • a payment indirectly funds a hybrid mismatch in another jurisdiction.

    These rules will neutralise hybrid mismatches by cancelling deductions or including amounts in assessable income.

    Practical Compliance Guideline PCG 2018/7 Part IVA of the Income Tax Assessment Act 1936 and restructures of hybrid mismatch arrangements provides guidance on when restructures may attract our attention.

    Last modified: 09 May 2022QC 69442