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The Treasury Laws Amendment (Tax Integrity and Other Measures No.2) Act, 2018 – which gives effect to the OECD Hybrid mismatch rules in Australia – received Royal Assent on August 24.
The law is aimed at deterring 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, resulting in double non-taxation or long term tax deferral.
The law contains a targeted integrity provision that applies to certain deductible interest payments (or payments under a derivative), made to an interposed foreign entity where the rate of foreign income tax on the payment is ten percent or less.
The new rules will apply to income years commencing on January 1, 2019, and to certain payments made after January 1, 2019.
The direct and indirect imported mismatch rules will be delayed to income years commencing on January 1, 2020 (to align with the EU introduction of the hybrid mismatch rules).
The tax authority said that it will issue taxpayer guidance on the changes.