(1) An entity (the test entity ) is a reverse hybrid in relation to a payment made to it if:
(a) subsection (2) applies to the entity in relation to a country and the payment; and
(b) subsection (3) applies to the entity in relation to a different country and the payment.
Note: The entity, the payments it makes, and its income or profits are identified disregarding tax provisions: see section 832-30.
Formation country--entity is transparent and payment is not within the tax base
(2) This subsection applies to a test entity in relation to a country (the formation country ) and a payment made to the entity if:
(a) the test entity is formed in the formation country; and
(b) for the formation country, the test entity is:
(i) not a * liable entity; and
(ii) for Australia--not a * member of a * consolidated group; and
(c) for the formation country, another entity (an investor ) is a liable entity in respect of income or profits of the test entity.
Note: For the meaning of liable entity , see section 832- 325.
Investor country--entity is not transparent
(3) This subsection applies to a test entity in relation to a country (the investor country ) and a payment made to the entity if, in the investor country:
(a) an investor identified in paragraph (2)(c) is a * liable entity (an investing taxpayer ) in respect of its own income or profits, but not in respect of the test entity's income or profits; or
(b) an entity that is a liable entity (also an investing taxpayer ) in respect of the investor's income or profits is not also a liable entity in respect of the test entity's income or profits.
Guide to Subdivision 832-F