Deducting Hybrid Mismatch Rules: Fit for Purpose? (Hall Chadwick)

Business Opportunities
April 19, 2021 - Hall Chadwick

This is a Thought Leadership article by Australian PrimeGlobal member firm Hall Chadwick which reviews whether the deducting hybrid mismatch rules in Subdiv 832G of the Income Tax Assessment Act 1997 are fit for purpose.

Buck Xiao and Anna Bullimore argue hybrid structures are wrongly targeted in the scaling down of Subdiv832G, the amendment to the Income Assessment Act 1997 (Cth) aimed to combat tax avoidance by large multinationals. Read their contribution to ATR.

The deducting hybrid mismatch rules in Subdiv 832G of the Income Tax Assessment Act 1997 (Cth) were purportedly introduced to combat tax avoidance by large multinational enterprises through duplication of deductions. Its effect is to quarantine certain tax losses. However, its scope, as originally enacted, was broad, with the unintended consequence of affecting many simple and small-scale cross-border transactions. A recent amendment has the effect of scaling down the scope of Subdiv 832G – but it also opens opportunities for tax avoidance. 

This article argues that both Subdiv 832G and the corresponding OECD recommendations in Action 2 of the BEPS Project wrongly target the hybrid structures as the mischief in question, leading to excessive taxation of economic profit, and that “loss duplication” is the real issue at hand. Consequently, it proposes further amendments under which a tax loss can only be used in either Australia or a foreign country, but not in both countries. Download full PDF HERE>

This article was first published by Thomson Reuters in the Australian Tax Review update: Vol 49 Part 4 January 8 2021 “Buck Xiao and Anna Bullimore, Deducting Hybrid Mismatch Rules –Fit for purpose?” 2020 Vol 49 Part 4 p 297. For all subscription inquiries please phone, from Australia: 1300 304 195, from Overseas: +61 2 8587 7980 or online at The official PDF version of this article can also be purchased separately from Thomson Reuters at

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Hall Chadwick

Hall Chadwick is a chartered accounting group in Australia delivering advice on a comprehensive range of accounting, audit, tax, business advisory and specialist services including corporate finance advisory, insolvency, forensics and litigation support. We deliver focused services for international business establishing or operating in Australia and those expanding into the Asia Pacific region. We work in all industries from property, construction, agribusiness, mining and mining services to energy, financial services and investment and more. Hall Chadwick is one of Australia’s top 20 accounting firms. We collaborate the talent and skills of over 450 staff to deliver solutions across Australia. Each practice area is actively managed by our Directors, providing our clients with direct access to experts and the highest level of business advice.

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