Key News Summary – to assist with the coming anti-hybrid mismatch rules, the Commissioner has issued Draft Law Companion Ruling LCR 2018/D9 and Draft Practical Compliance Guideline PCG 2018/D9.


On Wed 19.12.2018, the ATO issued 2 products – Draft Law Companion Ruling LCR 2018/D9 and Draft Practical Compliance Guideline PCG 2018/D9 – on the recently enacted hybrid mismatch rules.

  • Draft LCR 2018/D9 discusses the key terms “structured arrangement” and “party to the structured arrangement”.
  • Draft PCG 2018/D9 contains proposed practical guidance to help taxpayers determine whether the structured arrangement definition is satisfied and, if so, whether an entity is a party to the arrangement.

Schedules 1 and 2 to the Treasury Laws Amendment (Tax Integrity and Other Measures No. 2) Act 2018 (the Act), amend the ITAA 1997, introducing Division 832 and associated measures implementing the hybrid mismatch rules (see related Tax Technical Article).

A hybrid mismatch arises where there is a double non-taxation benefit where a cross border dealing results in:

  • a deduction/non-inclusion (D/NI) mismatch (broadly, a deduction being received for a payment in one country, where the corresponding income is not assessable income or included in the tax base in another country), or
  • a deduction/deduction (DD) mismatch (broadly, a deduction being received in two countries for the same payment).

Division 832, the various types of hybrid mismatches are identified in different Subdivisions, with specific qualification criteria and neutralisation impacts[8] for each type of hybrid mismatch. This Ruling is relevant for the following mismatches and subdivisions:

  • hybrid financial instrument mismatch (Subdivision 832-C)·
  • hybrid payer mismatch (Subdivision 832-D)·
  • reverse hybrid mismatch (Subdivision 832-E)·branch hybrid mismatch (Subdivision 832-F)·
  • deducting hybrid mismatch (Subdivision 832-G – secondary response only), and·
  • imported hybrid mismatch (Subdivision 832-H).

If the scheme satisfies the hybrid mismatch criteria (in the relevant subdivision) and at least one of the scope requirements, the amount of the hybrid mismatch will be neutralised by either:

  • disallowing a deduction, or
  • including an amount in assessable income.

The scope requirements, for the hybrid mismatch rules, include, broadly, satisfaction of at least one of the following:

  • the payment is made under a structured arrangement to which the entity is a party; or
  • he entities involved in the scheme are members of the same Division 832 control group’; or
  • for the hybrid financial instrument mismatch, the entities involved in the scheme are related persons.


COMMENTS on the drafts are due by 15 February 2019.

[ATO website: LCR 2018/D9, PCG 2018/D9; LTN 245, 19/12/18; Tax Month – December 2018]

FJM 24.1.19

CPD (comprehension) questions

  1. In what division are these anti-hybrid rules?
  2. What type of tax benefit does it attack?
  3. What are the corrective mechanisms under these rules?
  4. What are the three (alternative) key requirement, for these rules to apply?

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