Charles Suttie and Peter King discuss the offshore financial account information that needs to be reported to the ATO.
This year the Australian Taxation Office (ATO) will start receiving annual information about Australians’ offshore financial accounts from 77 jurisdictions including Switzerland, Singapore, the Cayman Islands, Bermuda, South Africa and Samoa.
For more than a year, the ATO has been activating automatic information exchange agreements through an international convention, which has been adopted by 117 jurisdictions, including more than 80 tax havens. Next on the list for activation are jurisdictions including Israel, Hong Kong, Panama, the Bahamas, and the United Arab Emirates.
The unprecedented move is part of an Organisation for Economic Co-operation and Development (OECD) initiative, the Common Reporting Standard (CRS), designed to crack down on global tax evasion.
Under the CRS, information in relation to new and existing accounts is collected by financial institutions and exchanged with tax authorities around the world.
High wealth individuals and family offices that are ‘Australian residents’ for tax purposes, and who have financial account information overseas, particularly in low tax or no tax jurisdictions.
Information about all controlling persons (including account holders) who are Australian tax residents.
The information will be provided in a standard electronic format suitable for automated processing by the ATO, including data-matching with existing data already held by the ATO or obtained from other government agencies.
The information includes: names, addresses, tax identification numbers, date of birth, account numbers, year-end account balances, the total amount paid or credited to the account holder or distributed to beneficiaries, details of investment income (including interest and dividends), account balances and sale proceeds from financial assets, accounts held in the names of individuals and entities (including, companies, partnerships, trusts and foundations).
Passive entities will be ‘looked through’ to identify the controlling persons. For example, the controlling persons of a trust are the settlors, trustees, protectors, beneficiaries and any individual exercising ultimate control over the trust. If the settlor, trustee, protector or beneficiary is an entity, then it is also looked through, and its controlling persons must be identified through the chain of ownership up to the controlling individuals.
If you have, or know of taxpayers who have, assets or income in tax havens overseas, chances are that information may be shared with the ATO one day. One way to manage the risk of potential penalty and interest that may be imposed, or referral for criminal prosecution, for failure to report foreign source income is to engage with the ATO early and make a voluntary disclosure.
For more information view our report, Common Reporting Standard: Offshore financial accounts to be reported.