11 Apr 2019 Implementation of the OECD hybrid mismatch rules
In the 2016-17 Budget, the Government announced it would implement the Organisation for Economic Cooperation and Development (OECD) hybrid mismatch and branch mismatch rules from Action Item 2 of the OECD Base Erosion and Profit Shifting (BEPS) Action Plan.
Law companion ruling (LCR)
The following LCRs have been released so far:
- Draft Law Companion Ruling LCR 2019/D2: OECD hybrid mismatch rules – targeted integrity rule which provides the Commissioner's interpretation of the hybrid mismatch targeted integrity rule set out in subdivision 832-J of the Income Tax Assessment Act 1997 (ITAA 1997).
The draft has been released for public consultation. Submissions close on 10 May 2019.
- Draft Law Companion Ruling LCR 2018/D9 OECD hybrid mismatch rules – concept of structured arrangement which provides the Commissioner's view of the law in relation to the phrases 'structured arrangement' and 'party to the structured arrangement' set out in section 832-210 of the Income Tax Assessment Act 1997 (ITAA 1997).
Practical compliance guideline (PCG)
To date, the following PCGs have been released.
- Draft Practical Compliance Guideline (PCG) 2018/D9 OECD hybrid mismatch rules – concept of structured arrangement. This contains practical guidance to assist taxpayers assessing the risk of the newly legislated hybrid mismatch rules applying to their circumstances - in particular in relation to the concept of 'structured arrangement' in section 832-210 of the ITAA 1997.
This PCG should be read in conjunction with LCR 2018/D9.
- Finalised PCG 2018/7 Part IVA of the Income Tax Assessment Act 1936 and restructures of hybrid mismatch arrangements to assist clients wishing to eliminate hybrid tax outcomes that would otherwise fall foul of the newly legislated hybrid mismatch rules.
This PCG will assist clients to manage their compliance risk by outlining straightforward (low-risk) restructuring to which the Commissioner will not seek to apply Part IVA. The PCG also encourages early engagement with us by those taxpayers whose arrangements fall outside the low risk parameters outlined in the PCG.
Clients potentially affected by the rules and considering restructuring should refer to this PCG to understand our compliance approach.
More information can be found here.