Document ID: chunk:federal_register_of_legislation:C2025C00029:section:5:p34
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 5 (pt 34/38)
Character Range: 7463773–7466591

*offshore hybrid mismatch is the *neutralising amount for the *deducting hybrid mismatch.

832‑545  When an amount gives rise to a deducting hybrid mismatch
 (1) A payment or other amount gives rise to a deducting hybrid mismatch if there is a *deducting hybrid in relation to the payment or other amount.
 (2) Each *deduction component of the *deduction/deduction mismatch mentioned in paragraph 832‑550(a) is a deduction component of the *deducting hybrid mismatch.
 (3) A *deducting hybrid mismatch is also a hybrid mismatch.

Ordering rule
 (4) However, a payment does not give rise to a deducting hybrid mismatch if it gives rise to a *hybrid financial instrument mismatch, a *hybrid payer mismatch, a *reverse hybrid mismatch or a *branch hybrid mismatch.

832‑550  Deducting hybrid
  An entity is a deducting hybrid in relation to a payment or other amount if:
 (a) the payment or other amount gives rise to a *deduction/deduction mismatch; and
 (b) the entity is:
 (i) for a payment—the entity that makes the payment; or
 (ii) for an amount that represents the decline in value of a depreciating asset (see paragraph 832‑110(4)(a))—the entity that holds the asset; or
 (iii) for an amount that represents a share in the net loss of a partnership or other transparent entity (see paragraph 832‑110(4)(b))—an entity that has an interest in the partnership or other transparent entity; and
 (c) the entity:
 (i) is a *liable entity in one deducting country (but not both); or
 (ii) satisfies the residency test in subsection 832‑555(9) in both deducting countries, and is also a liable entity in both deducting countries; or
 (iii) is a *member of a *consolidated group or a *MEC group.

832‑555  Identifying a secondary response country
 (1) This section applies if an amount gives rise to a *deducting hybrid mismatch, other than a deducting hybrid mismatch covered by subsection (2).

Dual residents—no secondary response
 (2) This subsection covers a *deducting hybrid mismatch if:
 (a) the only *liable entity in respect of income or profits of the *deducting hybrid is the deducting hybrid; and
 (b) the liable entity satisfies the residency test in subsection (9) in both deducting countries.
Note 1: For the meaning of liable entity, see section 832‑325.
Note 2: If the deducting hybrid is a dual resident, the mismatch may be neutralised by any country.

Country is a primary response country unless this section provides otherwise
 (3) A country in which the amount gives rise to a deduction or *foreign income tax deduction (a deducting country) is a primary response country in relation to the *deducting hybrid mismatch unless the country is identified as the secondary response country under subsection (4), (5), (6), (7) or (8).

Both countries recognise the same liable entity—residence country is