Peter Madden, Paul Sorrell, Fabian Fedele and Tamlyn Eccles explore new questions in the international dealings schedule relating to the hybrid mismatch rules.
The 2019 international dealings schedule (IDS) changes and instructions have recently been released. For the first time, the IDS includes a number of questions in section G to capture information relating to the new hybrid mismatch rules as well as a number of new questions in section C seeking further information relating to interests in foreign entities. A number of other changes have also been made.
As expected, the questions require specific disclosures regarding the application of the hybrid mismatch rules, as well as quantification of amounts of deductions denied or inclusions in income as a result of the rules. The new IDS also requires detailed disclosures by taxpayers that have restructured or replaced arrangements that would fall within the hybrid mismatch rules. This is aligned with question 22 of the Reportable Tax Position Schedule, Category C.
The hybrid mismatch rules are broadly applicable for years of assessment commencing on or after 1 January 2019. As such, the rules are effective and can impact the deductibility or assessability of amounts incurred or received by Australian taxpayers in respect of arrangements currently in place.
Given the timing of the introduction of the rules, it is important to consider to what extent the new IDS disclosures should impact taxpayers lodging income tax returns for income years ending between December 2018 and November 2019 (years during which the hybrid mismatch rules are not yet applicable).
KPMG has consulted with the ATO on certain potential ambiguities in the IDS Section G questions and received the ATO’s feedback.
In this article, we look at the questions introduced in section G relating to hybrid mismatches, as well as the current relevance of the disclosures to taxpayers lodging returns.
To read more of this article, please log on to KPMG Tax Now.
If you're yet to register for KPMG Tax Now, please do so.