7 March 2018

Making sure multinationals pay their fair share: Addressing hybrid loopholes

Note

The Turnbull Government is continuing to ensure multinationals pay their fair share of tax – today releasing revised exposure draft legislation to address hybrid mismatch arrangements.

Hybrid mismatches exploit the differences in tax jurisdictions.

This may occur, for example, where an amount is treated as interest in Australia, but is treated as a dividend in a foreign jurisdiction. Multinationals can use this mismatch to their advantage, to reduce the amount of tax they pay in Australia.

A mismatch can also occur where a deduction is available for the same payment in two or more jurisdictions.

The proposed rules are designed to prevent companies doubling up on taxation benefits. The rules will work by either denying deductions or including amounts in assessable income.

The exposure draft legislation implements the recommendations of the Organisation for Economic Co-operation and Development (OECD) reports Neutralising the Effects of Hybrid Mismatch Arrangements and Neutralising the Effects of Branch Mismatch Arrangements.

It also puts into action a targeted integrity rule to address arrangements designed to circumvent the hybrid mismatch rules.

The hybrid mismatch rules will further strengthen Australia's tax laws and are another example of the Turnbull Government's action to shut down loopholes and tackle tax avoidance head on.

By ensuring that all taxpayers including multinationals pay their fair share of tax, we ensure the sustainability of our tax system so that we can fund the infrastructure and services needed by Australians.

The exposure draft of the legislation is on the Treasury website.

Submissions are due by Wednesday April 4 2018 and can be sent to BEPS@treasury.gov.au. The Government encourages all interested parties to make a submission.