The Common Reporting Standard (CRS) is the latest weapon available to global tax authorities in their fight against international tax evasion. Developed by the Organisation for Economic Co-operation and Development (OECD), CRS is the single global standard for the collection, reporting and exchange of financial account information on taxpayers between the participant countries.
At last count, 102 countries are participants in the CRS, including Australia, China, Hong Kong (China), Malaysia, Singapore, South Africa and most tax haven countries.
Financial institutions (such as banks and other deposit-taking institutions), custodial institutions, investment entities, and specified insurance companies are required to report under the CRS. The range of information that is required to be reported is very broad and includes (but is not limited to) the taxpayer’s name, address, place of birth and tax file number as well as bank deposit and account balances, investments, interest, dividends and sales of assets that are associated with the taxpayer (and any entities connected with them).
The first data exchange was for the six months to 31 July 2017. This data was required to be exchanged with participating countries by 30 September 2018.
What you should do if you are living in Australia and have income and assets overseas that you are not disclosing to the ATO
The first question to resolve is whether you are a tax resident in Australia. This can be a very complex question and you should seek the professional advice of a tax specialist. As specialists in this area, we take this opportunity to share with you a very common misconception about the Australian tax residency rules – the fact that you are not in Australia for more than six months does not mean that you are not a tax resident here. You can trigger tax residency in a number of other ways, so it is imperative that you seek professional advice.
If you are a tax resident of Australia, you are taxable on your worldwide income and gains (note there are significant exclusions for foreign income and gains of “temporary residents”). Over the past few years, the ATO has “reminded” resident taxpayers of their obligations to disclose foreign earnings and has provided them with the opportunity (including tax and penalty concessions) to come forward and report any undisclosed amounts relating to foreign income and asset sales.
The combination of the new information available under CRS with that already available to the ATO through other information gathering initiatives (such as AUSTRAC) should prompt you to rethink your obligation to disclose your foreign income and asset sales to the ATO. Disclosure by way of “voluntary disclosure” (before you are asked the question by the ATO) may reduce potential penalties (up to 75% non-deductible) significantly!
As a non-resident taxpayer, you should still be mindful that your home country tax jurisdiction will receive your financial account data here in Australia from the ATO. You should therefore ensure that you are properly discharging your home country tax obligations.
The message is clear: the majority of countries have come together to combat tax evasion. Prudent cross-jurisdictional tax planning is now more crucial than ever. This includes taking proactive steps to resolve existing tax time bombs such as the impact of a finding of tax residency or identification of undisclosed foreign income and asset sales. The ATO has made its position very clear that it has little tolerance for tax evasion. As have the Australian tribunals and courts which continue to support the imposition of significant penalties and, in some cases, prosecution for tax evasion.
If you have concerns about your Australian tax residency status or complying with Australian tax law on your overseas income and assets, please get in touch with one of our tax specialists, on (07) 3391 5055 or via firstname.lastname@example.org.
Disclaimer: This communication contains general information only and is not intended to constitute financial product advice. Any information provided or conclusions made, whether express or implied, do not take into account the investment objectives, financial situation and particular needs of an investor. It should not be relied upon as a substitute for professional advice.