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Hybrid mismatch rules - a legislative maze

Publication date: 13 Dec 17 | Source: WEEKLY TAX BULLETIN

Issue: Issue 50, 1 Dec 2017

Abstract:

On Friday 24 November 2017, Treasury released draft text for the promised anti-hybrid rules.

The Exposure Draft (ED) sets out 2 distinct measures:

  • a universal rule denying an exemption for non-portfolio distributions received by an Australian company where those distributions are deductible by the payer, and a second rule denying imputation benefits for shareholders where a distribution paid by an Australian company has been deducted by the payer in a foreign country; and
  • a suite of dedicated anti-hybrid rules modelled on the OECD/G20 recommendations published in October 2015.

While both measures affect "hybrids" and are constructed using many of the same definitions, nevertheless, they are functionally independent: the exemption and franking rules are very general in their scope and will apply in many cases where the dedicated anti-hybrid rules are not enlivened.

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Author profiles

Prof Graeme Cooper FTI
Photo of author, Graeme COOPER Graeme is Professor of Taxation Law at The University of Sydney and a consultant to Greenwoods & Herbert Smith Freehills. He is a former Chair of the New South Wales State Council of The Tax Institute and former member of the National Council. He has worked as a consultant to the ATO, Treasury, Board of Taxation, United Nations, OECD, World Bank, the International Monetary Fund and several foreign governments. He was admitted to legal practice in New South Wales and Victoria, and practised commercial law and tax in Sydney before entering teaching. He has taught in law schools in Australia, Europe and the United States, and holds degrees from the University of Sydney, University of Illinois and Columbia University, New York. - Current at 26 June 2019
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Julian Pinson FTI
Julian Pinson, FTI, is a Director at Greenwoods & Herbert Smith Freehills Pty Limited. Julian advises on a wide range of tax matters, with a focus on banking and financial services, M&A and funds management. Julian has particular expertise in cross-border finance, TOFA, corporate restructures, debt and equity raisings and M&A. - Current at 26 June 2019
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Andrew Hirst
Andrew Hirst FTIA joined MGI Boyd in mid-2005 and since joinging, Andrew’s primary focus has been strategic tax planning for high net worth individuals and family owned businesses, as well as domestic and international structuring opportunities for investments both from and into Australia. Andrew has a Bachelor of Commerce from Sydney University, is a member of the Institute of Chartered Accountants in Australia, and is a Fellow of the Taxation Institute of Australia. - Current at 07 August 2008
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