Draft legislation released by the Federal Government is seeking to implement the recommendations of the 2015 Organisation for Economic Co-operation and Development (OECD) report to minimise damage caused by taxation hybrid mismatch arrangements.
The proposed hybrid mismatch rules would be designed to prevent double non-taxation benefits by either denying deductions, or including amounts in assessable income.
Under current hybrid mismatch rules, multinational groups which invested into Australia has been able to take advantage of a loophole and achieve double non-taxation outcomes by using investment structures outside the OECD rules.
“The Turnbull Government has already taken significant action to shut down loopholes and tackle tax avoidance head on. This includes introducing a strong Diverted Profits Tax and establishing a Tax Avoidance Taskforce in the Australian Taxation Office (ATO). These tough actions are further supported by the Multinational Anti Avoidance Law legislation that Labor opposed,” said a release from the Treasury.
“To ensure that these ‘branch mismatches’ are addressed the Government will also implement the recommendations of this later report. The Government will consult with stakeholders as it develops the targeted integrity rule and branch mismatch rules including through the release of separate exposure draft legislation.”
New legislation would apply to payments between related entities and parties to any structured arrangement.