As part of the 2016-17 Federal Budget, the Australian government announced it would implement the Organisation for Economic Co-operation and Development’s (OECD) Hybrid Mismatch rules developed under Action Item 2 of the OECD Base Erosion and Profit Shifting (BEPS) Action Plan, taking into account recommendations by the Board of Taxation.
The rules intend to deter the use of certain hybrid arrangements that exploit differences in the tax treatment of an entity or financial instrument under the income tax laws of two or more countries. This can result in double non-taxation or long term tax deferral.
The rules have a deferred date of commencement. Taxpayers will have time to review their existing hybrid arrangements, including time to unwind or restructure out of such arrangements in advance of the rules if they so choose.
Concerns have been raised about the potential for the Commissioner of Taxation to apply Part IVA of the Income Tax Assessment Act 1936 to any restructures out of existing hybrid arrangements.
ATO has developed and released draft Practical Compliance Guideline (PCG) 2018/D4 Part IVA of the Income Tax Assessment Act 1936 and Restructures of Hybrid Mismatch Arrangements for public consultation.
The draft PCG is aimed towards helping businesses understand compliance approach, with respect to Part IVA of the Income Tax Assessment Act 1936 and certain restructures that comply with the objective of the Hybrid Mismatch rules. The draft PCG is open for public consultation until 20 July 2018.
