Australia government released its draft Practical Compliance Guideline (PCG) 2018/D4 Part IVA of the Income Tax Assessment Act 1936 and Restructures of Hybrid Mismatch Arrangements. The Australian Taxation Office (ATO) has invited all interested parties to comment on this draft law by 20 July 2018.
As part of the 2016-17 Budget and 2017-2018 Budget, Australian government announced it would implement the 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. The rules have a deferred date of commencement. Taxpayers will have time to review their existing hybrid arrangements, including time to unwind or restructure such arrangements in advance of the rules. 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.
The draft PCG is aimed to help businesses understand the 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. It is part of the commitment to assist taxpayers in managing their compliance risks in circumstances where their intention is to eliminate hybrid tax outcomes. Any comments on further guidance that taxpayers may wish to get from Australian Tax Office in relation to the administration and operation of Division 832, or its associated amendments is welcomed.
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