globaltaxnews.ey.comSign up for tax alert emailsPrintDownload

17 December 2019

Australian Government issues Exposure Draft Bill to amend the hybrid mismatch rules for public consultation

On 13 December 2019, the Australian Treasury issued the Exposure Draft (ED) Bill, Tax Integrity – Clarifying the Operation of the Hybrid Mismatch Rules, to amend the hybrid mismatch rules. The ED is open for public consultation with comments due by 24 January 2020.

The ED contains changes announced in the 2019-20 Budget plus two additional technical corrections (dual inclusion + tier 1). Specifically, the ED:

Clarifies that the rules apply to multiple entry consolidated groups (MEC groups) in the same way as consolidated groups.

  • Clarifies that, for the purpose of applying the hybrid mismatch rules, the definition of “foreign income tax” does not include foreign, municipal or State taxes.

  • Clarifies the operation of the hybrid mismatch rules for trusts.

  • Ensures that the integrity rule appropriately applies to arrangements that have been designed to circumvent the operation of the hybrid mismatch rules, and specify that, in certain circumstances, the integrity rule can apply where other hybrid mismatch provisions have applied.

  • Clarifies the operation of the dual inclusion income on-payment rule.

  • Allows franking benefits on distributions made on Additional Tier 1 capital instruments, where the distributions give rise to an entitlement to a foreign income tax deduction and the Commissioner is notified that the foreign income tax deduction will not be claimed.

    For additional information with respect to this Alert, please contact the following:

    Ernst & Young (Australia), Perth

    Andrew Nelson | andrew.nelson@au.ey.com

    Ernst & Young (Australia), Melbourne

    Brendan Dardis | brendan.dardis@au.ey.com

  • Liz Cullinan | liz.cullinan@au.ey.com

  • Anthony G Stolarek | tony.stolarek@au.ey.com

  • Ernst & Young LLP (United States), Australian Tax Desk, New York

    David Burns | david.burns1@ey.com

    Ernst & Young LLP (United Kingdom), Australian Tax Desk, London

    ATTACHMENT

    Document ID: 2019-6596

     
     

    The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

     

    Copyright © 2025, Ernst & Young LLP.

     

    All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.

     

    Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

     

    "EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

     

    Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct Opt out of all email from EY Global Limited.

     


    Cookie Settings

    This site uses cookies to provide you with a personalized browsing experience and allows us to understand more about you. More information on the cookies we use can be found here. By clicking 'Yes, I accept' you agree and consent to our use of cookies. More information on what these cookies are and how we use them, including how you can manage them, is outlined in our Privacy Notice. Please note that your decision to decline the use of cookies is limited to this site only, and not in relation to other EY sites or ey.com. Please refer to the privacy notice/policy on these sites for more information.


    Yes, I accept         Find out more