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 However, its scope, as originally enacted, was broad, with the unintended consequence of affecting many simple and small-scale cross-border transactions.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.


  • Effect of the deducting hyrbid mismatch rules
  • OECD recommendations in respect of the deducting hybrid mismatch rules
  • Scope of deducting hybrid mismatch rules
  • Further proposed amendments
  • No foreign seperate use
  • The Australian domestic use election

Buck Xiao is Director Hall Chadwick Tax Advisory and Anna Bullimore is a Senior Analyst.

Read the article Australian Tax Review update: Vol 49 Part 4

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 http://legal.thomsonreuters.com.au/search. The official PDF version of this article can also be purchased separately from Thomson Reuters at http://sites.thomsonreuters.com.au/journals/subscribe-or-purchase. This publication is copyright. Other than for the purposes of and subject to the conditions prescribed under the Copyright Act 1968 (Cth), no part of it may in any form or by any means (electronic, mechanical, microcopying, photocopying, recording or otherwise) be reproduced, stored in a retrieval system or transmitted without prior written permission. Enquiries should be addressed to Thomson Reuters (Professional) Australia Limited. PO Box 3502, Rozelle NSW 2039. http://legal.thomsonreuters.com.au