ATO amnesty on unreported offshore income
Finishes on 19 December 2014
The Australian Taxation Office (ATO) has recently reiterated its intention to target unreported offshore income by announcing "Project DO IT: disclosure of offshore income today" to encourage taxpayers to voluntarily disclose previously unreported foreign income and assets.
The announcement precedes a planned ATO crackdown on international tax havens, which will include utilising information available through the Australian Transactions Reports and Analysis (AUSTRAC), which has been extended to comprise details provided by countries previously considered safe tax havens such as Switzerland and the Cayman Islands.
The ATO has warned that this amnesty, which is due to finish on 19 December 2014, provides a last chance for those who have not declared their overseas assets and income to bring them into the tax system. This includes:
- foreign income or a transaction with an offshore structure;
- deductions relating to foreign income that have been claimed incorrectly;
- capital gains in respect of foreign assets or Australian assets transferred offshore;
- income from an offshore entity that is taxable in Australia; and
- Offshore deductions relating to domestic income.
Under the Project DO IT amnesty, taxpayers making voluntary disclosures will:
- Only be assessed for the years where the time limit for amending assessments has not yet expired (generally only the last four income years);
- Be liable for a reduced shortfall penalty of 10% (no shortfall penalty will be imposed in a tax year where the additional income is $20,000 or less);
- Be liable for interest charges at normal rates on the tax owed;
- Not be entitled to utilise any losses arising for the years in which they are being assessed;
- Be able to seek assurance regarding the ATO's treatment of repatriated offshore assets;
- Be able to enter into a settlement deed to obtain additional certainty; and
- Not be liable to criminal investigation by the ATO on the basis of the disclosures made. The ATO will also not refer you for criminal investigation by another law enforcement agency.
The risks of not complying include:
- The ATO have unlimited time to review your tax affairs and amend your tax returns if you have engaged in conduct that amounts to evasion or fraud;
- The likelihood of being detected is higher than ever, given the ATO's increased access to offshore information and improved risk assessment capabilities;
- If you are caught, you could be assessed for tax, penalties and interest for all the years going back to the beginning of any offshore arrangement, not just the last 4 years under this new initiative;
- Tax shortfall penalties can be up to 90% of the tax owing instead of 10% under voluntary disclosure. Penalties are in addition to any tax and interest; and
- You could be investigated by the ATO, or referred by them for investigation by another law enforcement agency, for the purposes of a criminal prosecution
If you believe that you may have failed to disclose offshore income or assets, now is the time to act. Failure to do so before 19 December 2014 opens taxpayers up to an increased risk of ATO audit, and the prospect of much harsher penalties, including possible criminal prosecution for tax avoidance.
If you are concerned that any of the above may apply to your tax affairs, you should contact your GCC advisor for assistance on 02 9899 3044.