Document ID: chunk:federal_register_of_legislation:C2025C00029:section:5:p16
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 5 (pt 16/38)
Character Range: 7418399–7421207

*equity interest;
 (iii) a *derivative financial arrangement; and
 (b) the mismatch, or the part of the mismatch, is attributable to differences in the treatment of the debt interest, equity interest or derivative financial arrangement, arising from the terms of the interest or arrangement; and
 (c) the exception in subsection (2) does not apply.
Example: Redeemable preferences shares that are treated under this Act as a debt interest, and in a foreign country as an equity interest.

Exception for deferrals not exceeding 3 years
 (2) This exception applies if:
 (a) the difference in treatment mentioned in paragraph (1)(b) primarily relates to a deferral in the recognition of income or profits under the *debt interest, the *equity interest or the *derivative financial arrangement; and
 (b) the term of the interest or arrangement is 3 years or less.

832‑225  Hybrid requirement—payments under transfers of certain financial instruments
 (1) A *deduction/non‑inclusion mismatch, or a part of such a mismatch, meets the hybrid requirement in this section if:
 (a) the payment that gives rise to the mismatch is made under an *arrangement covered by subsection 832‑215(2); and
 (b) the mismatch, or the part of the mismatch, is attributable to differences in the treatment of the arrangement; and
 (c) the exception in subsection (2) of this section does not apply.

Exception for deferrals not exceeding 3 years
 (2) This exception applies if:
 (a) the difference in treatment mentioned in paragraph (1)(b) primarily relates to a deferral in the recognition of income or profits under the *arrangement; and
 (b) the term of the arrangement is 3 years or less.

832‑230  Hybrid mismatch—integrity rule for substitute payments
 (1) A payment also gives rise to a hybrid mismatch if:
 (a) the payment gives rise to a *deduction/non‑inclusion mismatch; and
 (b) the payment is made under an *arrangement under which any of the following is transferred:
 (i) a *debt interest;
 (ii) an *equity interest;
 (iii) a *derivative financial arrangement; and
 (c) the payment, or a part of the payment, (the substitute payment) could reasonably be regarded as having been converted into a form that is in substitution for a *return (however described) on the interest or arrangement; and
 (d) the return is covered by subsection (2).
 (2) This subsection covers a *return (however described) on a *debt interest, an *equity interest, or a *derivative financial arrangement, that is transferred if any of the following apply:
 (a) the return is made to the payer of the substitute payment, and is not *subject to foreign income tax or *subject to Australian income tax;
 (b) the return is not made to the payer of the substitute payment, but if it had been it would not have been subject to foreign income tax or