Do You Have Assets or Income Overseas That the Tax Office Doesn’t Know About?

a tax advisor guiding you through scattered coins, an hourglass, and a globe, symbolizing the importance of seeking professional assistance in navigating international financial matters and ATO's offshore disclosure initiative.

Act Now: Consult a Tax Advisor for ATO’s Project

Continuing our previous discussions, you might have seen recent media coverage regarding the Australian Taxation Office (ATO) amnesty on disclosures of overseas assets or income that have not been reported. It is important to note that this ATO initiative, known as Project DO IT, is nearing its closure date on 19th December 2014. To ensure compliance and take advantage of this opportunity, it would be advisable to consult a tax advisor.

What are the benefits of ATO’s “No Question Asked” Initiative?

The ATO initiative allows taxpayers to disclose assets or income overseas on a “no questions asked” basis. The ATO  will then issue amended assessments to the taxpayer for the years when they can go back and review assessments under the tax legislation. This Period of Review will differ for taxpayers depending on the income they have earned in the past and when assessments have been issued in recent years. In most cases, the ATO will issue amended assessments for 2010, but this may vary for some taxpayers.

Upon issuing the amended assessments, the ATO will charge a concessional penalty rate of 10% of the tax previously avoided (if they found the income themselves, they could levy penalty tax of up to 90%) and the concessional interest rate of the Shortfall Interest Charge (SIC) which comes to around 6%. Additionally, if the additional income not disclosed is less than $20,000 for a year, the 10% penalty may not be charged. Additionally, the administrative practise of the ATO is that if the penalty is less than $1,000, it is unlikely to be charged.

This initiative allows most taxpayers to come clean so the ATO picks up their assets and income in the system. That is the main reason the ATO has embarked on this initiative. They will not ask questions about how the assets arose (within reason – see conditions below). They want to know that the income will be included in tax returns for the years mentioned above and from this point on.

You can access the initiative unless you breach one of the specific exclusions below.

  • The ATO has already started audit action against you related to omitted offshore income, capital gains or overstated deductions.
  • You have already received a compulsory information-gathering notice from the ATO to produce information on offshore activities.
  • You have been involved in promoting or marketing a tax evasion scheme
  • You are already under criminal investigation concerning tax-related criminal offences
  • Your foreign assets were derived from severe criminal offences not related to tax
  • You have not complied with the specific obligations from a previous offshore voluntary disclosure initiative that you were involved in.

The initiative has been embraced by taxpayers, with the number of taxpayers disclosing to the ATO being 2,300 as of last week, far in advance of the number of what the ATO expected to disclose of 1,000.

What should you do now?

So what do you do now? A standard form can be accessed on the ATO website to disclose all the relevant information that the ATO will be after. Alternatively, suppose you do not know all the information now. In that case, you can send an Expression of Interest (a simple email) to the Project DO IT section of the ATO by the 19th of December to advise them that you have assets and income to disclose. Still, having some extra time to get the information together would be best. They will give you 90 days to do this and lodge the relevant form.

This is a significant opportunity to clear your conscience and declare assets and income for a vastly reduced penalty. It will also make money usable in Australia, as one of the biggest problems with having assets overseas that you have not declared is that you cannot use them here without attracting attention.

The ATO have some significant initiatives starting in the new year, where they can access financial records from a much larger number of countries and in much more depth. They say that if you don’t utilise this initiative, you will likely be caught over the coming years, and you will be heavily penalised if the ATO finds the assets instead of you coming clean about them first. In light of these changes, it’s crucial to seek professional guidance from a tax advisor who can help you navigate these complexities and ensure that you are in compliance with the new regulations.

If you would like to discuss this initiative, please get in touch with us urgently to determine if you need to disclose before 19th December.

*Correct as of December 2014

Disclaimer – Kreston Stanley Williamson has produced this article to serve its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas in this article, you must seek advice about your circumstances. Liability is limited by a scheme approved under professional standards legislation.

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