Commonwealth Consolidated Acts Commonwealth Consolidated Acts(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 secondary response
(4) If:
(a) the * deducting hybrid is itself the * liable entity in each deducting country; and
(b) in one deducting country, the deducting hybrid does not satisfy the residency test in subsection (9); and
(c) in the other deducting country, the deducting hybrid does satisfy the residency test;
then the country mentioned in paragraph (b) is the secondary response country.
(5) If:
(a) in both deducting countries, the same entity is the * liable entity in respect of the income or profits of the * deducting hybrid; and
(b) in one deducting country, the liable entity does not satisfy the residency test in subsection (9); and
(c) in the other deducting country, the liable entity does satisfy the residency test;
then the country mentioned in paragraph (b) is the secondary response country.
Countries recognise different liable entities--non - parent country is secondary response
(6) If:
(a) the * liable entity for one deducting country is a different entity to the entity that is the liable entity for the other deducting country; and
(b) in one deducting country, the * deducting hybrid is the liable entity;
then the country mentioned in paragraph (b) is the secondary response country.
(7) If:
(a) the * liable entity for one deducting country is a different entity to the entity that is the liable entity for the other deducting country; and
(b) the * deducting hybrid is not the liable entity in either country; and
(c) in one deducting country, the entity that is a liable entity is also a liable entity in respect of the income or profits of the entity that is the liable entity in the other deducting country;
then the country mentioned second in paragraph (c) is the secondary response country.
(8) If:
(a) the * liable entity for one deducting country is a different entity to the entity that is the liable entity for the other deducting country; and
(b) subsections (6) and (7) do not apply; and
(c) in one deducting country, the deducting hybrid and the liable entity both satisfy the residency test in subsection (9);
then the country mentioned in paragraph (c) is the secondary response country.
Residency test
(9) An entity satisfies the residency test in this subsection in relation to a country, if:
(a) if the country is Australia--the entity is an * Australian entity; or
(b) if the country is a foreign country:
(i) the entity is a resident of the foreign country for the purposes of the law of the foreign country relating to * foreign income tax (except a tax covered by subsection 832 - 130(7)); or
(ii) the tax base of the entity, as it relates to foreign income tax (except a tax covered by subsection 832 - 130(7)), includes income from worldwide sources.