Implementation of the OECD hybrid mismatch rules
The Government has committed to the implementation of Action Item 2 of the G20/OECD BEPS Action Plan, which recommends neutralising the effects of hybrid mismatch arrangements that occur due to the different treatment of an entity or instrument, under the laws of two or more tax jurisdictions.
The rules will apply to related parties, members of a control group and structured arrangements that involve cross-border hybrid financial instruments and/or hybrid entity structures.
The 'OECD anti-hybrid rules' (rules) operate to:
- deny deductions for the payer (or alternatively include taxable income in the hands of the payee) where an entity is able to claim a tax deduction in one jurisdiction but not include an income amount in the other tax jurisdiction; and
- deny duplicate deductions where an entity is able to claim a tax deduction in both tax jurisdictions for a single payment.
The treatment of hybrid regulatory capital issued by some banks and insurers affected by the rules is still under consideration.
The rules will apply to payments made on or after the later of 1 January 2018 or six months following the date of Royal Assent for the legislation.
Legislation and supporting material
- Legislation is currently being developed for this measure.
Find out more
The implementation of the OECD hybrid mismatch rules will prevent the use of hybrid mismatch arrangements by multinationals to minimise the tax they pay in Australia.