Taxpayers are being urged to come clean this tax time, with the ATO now in receipt of financial account information of more than 1.6 million offshore accounts holding over $100 billion.
With the Common Reporting Standard (CRS) now in full swing, the Tax Office now has access to financial account data from over 65 foreign jurisdictions which have committed to exchanging information with each other.
ATO visibility over foreign financial account information will allow it to track Australian taxpayers who are not reporting foreign income.
Account information being shared will include depository accounts, custodial accounts, debt or equity accounts, and cash value insurance and annuity contract accounts.
The data will contain details about each financial account including the account balance, interest payments, dividend payments, proceeds from the sale of assets and other income.
While the CRS was legislated to come into effect on 1 July 2017, the first round of data from foreign jurisdictions was received in September 2018, with the second data exchange set to take place next month.
“If you’re an Australian resident for tax purposes, you are taxed on your worldwide income, so you must declare all of your foreign income no matter how small the amount may be. This may include income from offshore investments, employment, pensions, business and consulting, or capital gains on overseas assets,” said ATO assistant commissioner Karen Foat.
“Australians that deliberately move cash overseas in an attempt to hide it should be concerned. Hiding your assets and income offshore is pointless. ‘Tax havens’ are becoming a less effective model as international agreements improve transparency. You can no longer hide money behind borders.
“Whether it is rental income from your old family home, an untouched bank account earning interest, or salary from working offshore, it must be reported. Even if you have paid tax on the overseas income, it must be reported to the ATO; however, you may be able to claim a foreign income tax offset to account for any foreign tax paid.”
Early data available to the ATO has revealed that many Australians have financial dealings in countries like China, the United Kingdom, Switzerland, Singapore and the United States.
Last year, 106 Australians who were suspected of utilising tax evasion schemes through holding unnamed numbered Swiss bank accounts were singled out by the Tax Office.
Court ruling sets tax precedent on leaked information
The warning on undeclared foreign income comes as the High Court ruled that information garnered from data leaks can also be used by the ATO — even where the source of that leaked information is a law firm.
Second commissioner Jeremy Hirschhorn labelled the court decision “not just a win for the ATO, it’s a win for the Australian community”.
He said that it meant information garnered through the infamous Paradise Papers on suspected offshore tax evasion, as well as other data leaks, can be used by the Tax Office to chase unpaid taxes.
“The information in question was already in the public domain,” he said in a statement.
“Once we have information, we can’t just ignore it — we are obliged to use all relevant information we have.
“It would be a perverse outcome if the ATO and the courts were not allowed to take into account information that the public at large can access, or had to forget information that is known.”
Mr Hirschhorn added: “This ruling ensures that the ATO will continue to be able to use information in its possession and can make decisions based on all of the available facts. An offshore law firm is not a cloak of invisibility to hide offshore arrangements.”
The comments were in reference to the Glencore International v Commissioner of Taxation case before the High Court.
Adam Zuchetti is the editor of My Business, and has steered the editorial direction of the publication since the beginning of 2016. Before joining My Business, he worked on fellow Momentum Media titles The Adviser and Mortgage Business.
The two-time Publish Awards finalist has an extensive journalistic career across business, property and finance, including a four-year stint in the UK. Adam has written across both consumer and business titles, including for News Corp Australia and Domain.
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