On 25 October 2018, the ATO issued Practical Compliance Guideline PCG 2018/7 – Part IVA of the Income Tax Assessment Act 1936 and restructures of hybrid mismatch arrangements (PCG 2018/7). PCG 2018/7 sets out the ATO’s compliance approach to restructures out of existing hybrid arrangements to avoid the potential application of hybrid mismatch rules, and certain restructures that have the effect of preserving Australian tax benefits that would otherwise be disallowed.
PCG 2018/7 sets out factors that the Commissioner would expect to be present in order for him to consider a restructure to be ‘low risk’. It also provides six restructuring scenarios to which the Commissioner would not seek to apply the hybrid mismatch rules. Broadly, each scenario illustrates a straightforward restructure which removes the hybrid element of the existing arrangements whilst the surrounding facts and circumstances remain unchanged.