New incentive for Australian residents to declare offshore income
The net is closing on those who live in Australia and who have undeclared overseas assets, pensions, ISA’s, shares or foreign pension schemes.
Australian Tax Commissioner Michael D’Ascenzo’s urges Australian residents who may not have declared all income from offshore activities to “do the right thing to get their tax affairs in order” by 30 June 2010.
According to Geraint Davies, Managing Director of Montfort International, Australia is not alone. ‘Qualifying Recognised Overseas Pension Schemes (QROPS) have been seen as the solution to the taxation issues created by non-declaration of UK pension schemes to foreign jurisdictions, but this is not necessarily the right move. In fact some people may have exempt income so suitable financial advice for the country of residence is an absolute must.’
“Australia has highly sophisticated processes and systems to trace fund flows around the world and they are getting better at it,” says Davies. “Banks and other overseas tax jurisdictions can easily identify people with undeclared income. What were once considered highly complex and sophisticated arrangements to dodge liability now provide easy pickings.”
Australia has tax information exchange agreements with nine countries and more will soon follow. With over forty overseas jurisdictions having signed a Double Tax Agreement with Australia, only the most naïve will want to make a non-declaration stance with the Australian Taxation Office (ATO). The ATO matches data supplied by overseas revenue agencies, financial institutions and AUSTRAC with income tax returns to identify undeclared foreign income and to identify Australian residents involved in foreign transactions.
In 2007 the ATO made a similar offer and as at 31/10/09 more than 3,000 disclosures had been made, totalling over $306 million in omitted income and raising nearly $65 million in liabilities.
“Tax advisers have told us of clients with undisclosed foreign income want to come forward to set things right, but are concerned about the consequences of doing so, particularly the potential for criminal investigation,” Mr D’Ascenzo said.
“People can now approach us anonymously for an indication of whether we would initiate an investigation to determine whether there is a potential breach of the criminal law. In making this decision, we will often seek advice from an appropriately qualified panel which will include external members’
“This offer is not valid if we commence an audit so I remind people again — contact us before we contact you. There’s a much higher price to be paid later if we discover undeclared income through an audit process. Penalties can be as high as 90 per cent, and we will seek prosecution in serious cases. There is nothing wrong with holding an offshore account or investing overseas as long as you pay any Australian tax due, however we will continue to focus on the misuse of offshore financial arrangements.”
The new offer doubles the shortfall penalty from 5% to 10% should a person’s additional income from offshore activities be more than $20,000 in a tax year.
There is some comfort for those with additional taxable income of $20,000 or less in a tax year as they will not have to pay a shortfall penalty for that year. This remains unchanged from the previous initiative.
For more information and assistance on structuring your finances for migration to Australia, please do not hesitate to contact the adviser team at Montfort International on 01483 202072.
Australian Tax Commissioner Michael D’Ascenzo’s urges Australian residents who may not have declared all income from offshore activities to “do the right thing to get their tax affairs in order” by 30 June 2010.
According to Geraint Davies, Managing Director of Montfort International, Australia is not alone. ‘Qualifying Recognised Overseas Pension Schemes (QROPS) have been seen as the solution to the taxation issues created by non-declaration of UK pension schemes to foreign jurisdictions, but this is not necessarily the right move. In fact some people may have exempt income so suitable financial advice for the country of residence is an absolute must.’
“Australia has highly sophisticated processes and systems to trace fund flows around the world and they are getting better at it,” says Davies. “Banks and other overseas tax jurisdictions can easily identify people with undeclared income. What were once considered highly complex and sophisticated arrangements to dodge liability now provide easy pickings.”
Australia has tax information exchange agreements with nine countries and more will soon follow. With over forty overseas jurisdictions having signed a Double Tax Agreement with Australia, only the most naïve will want to make a non-declaration stance with the Australian Taxation Office (ATO). The ATO matches data supplied by overseas revenue agencies, financial institutions and AUSTRAC with income tax returns to identify undeclared foreign income and to identify Australian residents involved in foreign transactions.
In 2007 the ATO made a similar offer and as at 31/10/09 more than 3,000 disclosures had been made, totalling over $306 million in omitted income and raising nearly $65 million in liabilities.
“Tax advisers have told us of clients with undisclosed foreign income want to come forward to set things right, but are concerned about the consequences of doing so, particularly the potential for criminal investigation,” Mr D’Ascenzo said.
“People can now approach us anonymously for an indication of whether we would initiate an investigation to determine whether there is a potential breach of the criminal law. In making this decision, we will often seek advice from an appropriately qualified panel which will include external members’
“This offer is not valid if we commence an audit so I remind people again — contact us before we contact you. There’s a much higher price to be paid later if we discover undeclared income through an audit process. Penalties can be as high as 90 per cent, and we will seek prosecution in serious cases. There is nothing wrong with holding an offshore account or investing overseas as long as you pay any Australian tax due, however we will continue to focus on the misuse of offshore financial arrangements.”
The new offer doubles the shortfall penalty from 5% to 10% should a person’s additional income from offshore activities be more than $20,000 in a tax year.
There is some comfort for those with additional taxable income of $20,000 or less in a tax year as they will not have to pay a shortfall penalty for that year. This remains unchanged from the previous initiative.
For more information and assistance on structuring your finances for migration to Australia, please do not hesitate to contact the adviser team at Montfort International on 01483 202072.
Labels: Australia financial advice, Financial advice, Pensions in Australia, QROPS, Tax Haven
