Taxation (International and Other Provisions) Act 2010 section 259MB

Application of Chapters 3, 4, 5 and 7

Section 259MB provides a de minimis exemption for investors in transparent funds where their share of a mismatched payment or quasi-payment is less than 10% of the income that would have arisen to the fund, provided the mismatch does not arise under a structured arrangement.

• Where a hybrid mismatch chapter (3, 4, 5 or 7) applies to a payment or quasi-payment and no structured arrangement is involved, the section looks at whether a proportion of that payment is attributable to a person through their interest in a transparent fund (the "primary fund").
• If a person's attributable share of the payment through their interest in the primary fund is less than 10% of the ordinary income that would have arisen to the fund had it been a taxable person, that share is disregarded when calculating the extent of any mismatch.
• The "primary fund" is the first transparent fund in any chain — so if a person holds an indirect interest through a series of transparent funds, the primary fund is the one at the bottom of the chain in which the mismatch arises.
• Connected persons who both hold interests in the same primary fund must aggregate their shares, meaning they cannot individually fall below the 10% threshold if together they meet or exceed it.

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