Treasury Laws Amendment (Tax Integrity and Other Measures No. 2) Act 2018 (84 of 2018)

Schedule 1   OECD Hybrid Mismatch Rules

Part 2   Other amendments

Income Tax Assessment Act 1997

12   After section 230-520

Insert:

230-522 Adjusting a gain or loss that gives rise to a hybrid mismatch

(1) This section applies if a provision of Division 832 would, apart from section 832-785, apply to make not allowable an amount (the relevant amount ) that is all or a part of the deduction for:

(a) a loss from a *Division 230 financial arrangement; or

(b) an amount treated under section 832-790 as a separate loss from a Division 230 financial arrangement.

(2) The following have effect:

(a) if (disregarding section 832-790) you made a loss from the *financial arrangement, and the relevant amount does not exceed the amount of the loss - the amount of the loss you made is reduced by the relevant amount;

(b) if (disregarding section 832-790) you made a loss from the financial arrangement, and the relevant amount exceeds the amount of the loss:

(i) you do not make a loss from the financial arrangement; and

(ii) instead, you make a gain from the financial arrangement equal to the amount of the excess;

(c) if (disregarding section 832-790) you made a gain from the financial arrangement - the amount of the gain is increased by the relevant amount.

(3) The effect of subsection (2) is to be disregarded for the purposes of paragraph (c) of step 1 and paragraph (c) of step 2 of subsection 230-445(1) (about balancing adjustments).