Implementation of the OECD hybrid mismatch rules


As part of the 2015 Budget, the then Treasurer, the Hon Joe Hockey MP, wrote to the Board of Taxation to ask it to consult on implementation of hybrid mismatch rules developed by the OECD. On 14 July 2015, the Treasurer issued the terms of reference for this project.

Terms of reference

  1. The Board of Taxation (Board) is asked to undertake consultation on the implementation of new tax laws to neutralise hybrid mismatch arrangements (hybrid mismatch rules), pursuant to the recommendations of the G20 and OECD under Action Item 2 of the Base Erosion and Profit Shifting (BEPS) Action Plan.
  2. Hybrid mismatch arrangements can be used to achieve double non-taxation, including long-term tax deferral. They reduce the collective tax base of countries around the world even if it may sometimes be difficult to determine which individual country has lost tax revenue. Under Action 2 of the BEPS Action Plan, the OECD has developed recommendations regarding the design of anti-hybrid rules.
  3. Guidance on the practical operation of the rules and refinements on some outstanding issues will be released in a report in October 2015. The commentary will set out the principles underpinning the recommendations, agreed definitions and will include detailed examples of the practical application of the anti-hybrid rules.
  4. The Board is asked to examine how best to implement anti-mismatch rules in the Australian legal context. In particular, the Board should identify an implementation strategy that has regard to:4.1. Delivering on the objectives of eliminating double non-taxation, including long term tax deferral;4.2. Economic costs for Australia; 4.3. Compliance costs for taxpayers; and 4.4. Interactions between Australia’s domestic legislation (e.g. the debt-equity rules and regulated capital requirements for banks), international obligations (including tax treaties) and the new anti-hybrid rules.
  5. The Board should conduct targeted consultation with relevant parties. We ask that the Board utilise its extensive links with tax professionals and key business groups. The Board should also work closely with Treasury and Australian Taxation Office in preparing its advice.
  6. Further, the advice should utilise and build upon the conclusions of the Board’s recent review of Australia’s debt/equity rules and its consultation with businesses about their perspective on the G20 / OECD BEPS Action Plan.
  7. The Board is requested to report to Government by March 2016 to allow this issue to be considered as part of the 2016 Budget.

Consultation Paper

On 20 November 2015, the Board released its Consultation Paper on the Implementation of the OECD hybrid mismatch rules.

The Chair of the Board, Mr Michael Andrew, announced the release of the Consultation Paper [PDF 1.23MB | RTF 4.04MB]. The Board developed this Consultation Paper to invite submissions and facilitate stakeholder consultation on the issues raised in accordance with the terms of reference given for the review. Submissions to the review closed 15 January 2016.

Working Group

Ms Karen Payne led the Board’s consultation on implementation of hybrid mismatch rules. A working group was established with members including representatives of the Australian Taxation Office, Treasury, academia, community organisations, businesses and professional firms.

Board’s Report on the implementation of the OECD hybrid mismatch rules

On 31 March 2016 the Board completed its consultation on the implementation of hybrid mismatch rules developed by the OECD and provided its report to Government. On 3 May 2016, the Government announced the release of the Board’s final report on the implementation of the Organisation for Economic Co-operation and Development (OECD) hybrid mismatch rules.

Government Response

The Government announced a measure in the 2016-17 Budget, Tax Integrity Package – implementing the OECD hybrid mismatch arrangement rules, which forms the Government’s response to the report. The Government requested the Board undertake further work on how best to implement these rules in relation to regulatory capital as part of this measure. The Boards work on the Application of Hybrid Mismatch Rules to Regulatory Capital can be found here.

Further information

For further information about the Board’s work on Implementation of the hybrid mismatch rules, please contact the Board of Taxation Secretariat at or (02) 6263 4366.


Submissions received

Submitter Download
American Chamber of Commerce in Australia 758KB
Corporate Tax Association of Australia 850KB
Ernst & Young 49KB
Insurance Australia Group Limited (IAG) 181KB
Joint submission: CBA, Macquarie Group, NAB, Westpac 830KB
PricewaterhouseCoopers 1MB
The Tax Institute 96KB