ATO Issues Draft Tax Guidance on Hybrid Mismatch Rules

ATO Issues Draft Tax Guidance on Hybrid Mismatch Rules

On June 21, 2018, the Australian Taxation Office (ATO) published for stakeholders’ comments draft Practical Compliance Guideline (PCG 2018/D4) to assist taxpayers who may be affected by the country’s hybrid mismatch rules and wish to unwind or restructure out of existing hybrid arrangements.

Australia’s hybrid mismatch rule – which seeks to implement OECD’s BEPS Action 2 proposals – 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.

The draft PCG aims to assist taxpayers by setting out the ATO’s compliance approach with respect to Part IVA of the Income Tax Assessment Act (ITAA), 1936, and certain restructures that comply with the objectives of the hybrid mismatch rules.

The draft guidance would assist taxpayers to manage their compliance risk in circumstances where their intention is to eliminate hybrid outcomes. It does so by outlining restructuring that the ATO considers to be of “low risk” and to which the ATO would not seek to apply Part IVA of the ITAA, 1936.

Comments must be received by July 20.