2019 International Dealings Schedule changes for Financial Services

The ATO has released the 2019 version of the International Dealings Schedule (IDS) and there have been significant changes compared to previous years. We highlight some important disclosure changes which may be relevant for financial services entities who are required to complete an IDS for the 2019 income year.


The 2019 IDS contains a new Section G (Questions 45 to 51) dealing with hybrid mismatches. Broadly, the IDS instructions state that taxpayers are required to answer “Yes” at Question 45 (Did the hybrid mismatch rules affect you?) if they had any arrangements in place at any time during the income year which had the potential to give rise to a hybrid mismatch amount under Division 832, regardless of whether or not the amount was neutralised (i.e. whether there was a deduction denied or amount included in assessable income).

The broad construct of this question raises the following questions:

(a) Timing of the disclosures - given the hybrid mismatch rules in Division 832 generally only apply to taxpayers for income years commencing on or after 1 January 2019, the hybrid mismatch rules should not have applied to any taxpayers for the 2019 income year (for example, income years ended 31 December 2018 or 30 June 2019). Although it is not entirely clear from the IDS instructions, it would follow that the appropriate answer should be “No” to Question 45 for the 2019 income year. The primary purpose of including the new hybrid mismatch disclosures in the 2019 IDS therefore seems to be to put taxpayers on notice that they will be required to complete these questions in their 2020 IDS, particularly 31 December 2019 early balancers where they are required to lodge their 2020 tax returns before the release of the 2020 version of the IDS.

(b) Scope of the disclosures - the IDS instructions specifically state that taxpayers should disclose amounts at Question 46 where payments gave rise to deduction/non-inclusion (D/NI) or deduction/deduction (D/D) mismatches “prior to any adjustments for dual inclusion income, for equivalent foreign hybrid mismatch rules and for income recognised in later years.

It is clear that the ATO is focussed on not only identifying hybridity but also where hybridity is negated by, for instance, dual inclusion income. We suspect that dual inclusion income will be a significant ongoing area of focus for the ATO, especially for inbound US groups. This may particularly be the case having regard to recent US tax changes (BEAT) which may make it more likely that the US “checks the box” in some cases to treat foreign subsidiaries as disregarded entities.

Taxpayers need only disclose details of their top three material arrangements which gave rise to a hybrid mismatch. Practically though, this means that taxpayers would need to review all potential hybrid mismatches in order to be able to support how they determined their top three arrangements.

Other disclosures in Section G of the 2019 IDS include, broadly:

- Question 47 – whether your international related parties have an offshore hybrid mismatch

- Question 48 – whether you paid an amount of interest or an amount under a derivative financial arrangement to an international related party which was not taxed or taxed at 10% or less, and whether any deductions were denied under the integrity rule in Subdivision 832-J

- Question 49 – whether you restructured or replaced an arrangement which would have been subject to any of the hybrid mismatch rules in the current year or the prior year if the arrangement was still in place

- Question 50 – whether you received a foreign equity distribution that gave rise to a foreign income tax deduction, including the amount that is not non-assessable non-exempt under section 768-7

- Question 51 – whether you derived branch hybrid mismatch income, including the amount that is not non-assessable non-exempt under subsection 23AH(4A)


Another new feature of the 2019 IDS is the splitting out of disclosures in relation to CFCs which are AFI subsidiaries at Question 21f, including identifying amounts in respect of AFI subsidiaries which principally derive their income from the lending of money.

This is not entirely surprising given the recent release of Taxation Determination TD 2019/8 which sets out the ATO’s views on the concept of “a business whose income is principally derived from the lending of money” in the definition of a financial intermediary business. It is clear that AFI subsidiaries are, once again, a focus area for the ATO.


Question 19a of the IDS has also been revised to require taxpayers to identify any Division 230 financial arrangements that gave rise to TOFA gains or TOFA losses which are not also debt interests under Division 974, and to quantify the “TOFA value”, and gains and losses in respect of those arrangements. It is not entirely clear what the ATO means by the “TOFA value” of financial arrangements and whether this always aligns with accounting value.

This question is drafted extremely broadly and is prima facie likely to be relevant for a significant number of financial services taxpayers. Whilst the IDS instructions make clear that TOFA amounts in respect of ordinary shares are not required to be disclosed, other equity interests where relevant TOFA elections have been made, as well as derivative arrangements, will be caught by this disclosure.



Mary Hu

Senior Associate


Andrew Hirst

Director, Head of Financial Services


Julian Pinson