If you have undeclared money in a bank account outside Australia, it is now highly likely you will be pulled up by the Australian Tax Office.
A new global standard on automatically exchanging tax details, endorsed by G20 finance ministers in Sydney in February, was adopted this week by the 34 OECD members countries plus Argentina, Brazil, China, Colombia, Costa Rica, India, Indonesia, Latvia, Lithuania, Malaysia, Saudi Arabia, Singapore and South Africa
Craig Cooper, director of tax services at accountants RSM Bird Cameron, says the exchange of information will happen annually and automatically without the other country having to make a specific request.
“For Australians who have financial interests outside Australia hidden in financial institutions, it is increasingly likely that those foreign financial institutions will be reporting their names and details together with income earned to the local revenue authority, which in turn will transmit that information to the ATO (Australian Tax Office).”
Cooper says the new standard will operate in the other direction as well.
Non-Australians who have money invested in Australia or through Australian financial institutions should expect that income information will be exchanged with the revenue authority of their country of residence.
Cooper says this new global standard is a real piece in the fight against tax evasion and will in time lead to a reduction in the need for foreign withholding taxes.
OECD Secretary-General Angel Gurría says tax fraud and tax evasion are not victimless crimes: they deprive governments of revenues needed to restore growth and jeopardise citizens’ trust in the fairness and integrity of the tax system.
He says the global standard is another major step towards “ensuring that tax cheats have nowhere left to hide”.
RSM Bird Cameron’s Craig Cooper says financial institutions are required to provide certain information about all their customers including country of origin and the income and capital transactions those customers undertake.
That information is provided to the Australian Taxation Office (ATO) which will then exchange that information with the revenue authorities of other participating countries.
There are two global institutions involved. One is the forum on transparency and exchange of information for tax purposes. The other is the multilateral convention on mutual administration assistance in tax matters.
“These institutions have effectively closed down the world’s tax havens,” Cooper says.
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