The world is close to the point where hiding money offshore is foolhardy, no matter how little or large the amount is.
As the loopholes continue to close, the Australian Tax Office (ATO) has announced a voluntarily scheme for people to declare unreported foreign income and assets.
The ATO wants taxpayers with offshore assets to report their interests ahead of a global crackdown on people using international tax havens.
The deal is good because the ATO will limit any penalties to 10% rather than the usual ceiling of 90%. Escaping a criminal investigation is also a major benefit.
Craig Cooper, director of tax services, at accountancy group RSM Bird Cameron, says it’s no longer feasible to hold money in a foreign bank account without declaring it.
“You would only want to put money into a reputable bank,” he says.
“There are plenty of less reputable banks in the world, but to entrust money to them would be an invitation for that money to be stolen.
“It makes no commercial sense to try and save Australian tax by hiding money offshore, only to have the amount deposited stolen. Losing 100 cents in the dollar to save 45 cents (tax) in the dollar?”
And if you do put money into a reputable bank, that bank will need to enforce its account opening procedures which will involve proving the identity of the account holder.
The bank will know that the account holder is an Australian.
And that means the account holder will be caught up in a major initiative adopted earlier this year through the OECD by which signatory members will automatically exchange financial account information.
In short, the foreign bank will let the ATO back in Australia know that an Australian has opened an account and what’s in it.
Even countries previously thought of as tax havens, such as Switzerland and the Cayman Islands, are working with tax authorities around the world to increase financial transparency.
Last financial years, exchanges of information with treaty partners contributed to about $480 million of adjusted tax, penalties and interest to Australian revenue.
RSM Bird Cameron’s Craig Cooper says the future is clear.
Information is already, and has for many years, been exchanged by various overseas revenue authorities and the ATO under bilateral arrangements.
“Any Australian who currently has money overseas in foreign bank accounts would be well advised to give serious consideration to taking up this current amnesty,” he says.
It’s only a matter of time before those accounts will be tracked down.
The ATO’s current offer to those with undeclared offshore accounts is essentially an amnesty, or part amnesty.
In the two months since the launch of the offshore voluntary disclosure initiative, Project DO IT, the ATO has received more than 350 enquiries and almost 100 disclosures have been lodged.
Some of the disclosures include people who have moved to Australia but failed to disclose income from property and other assets overseas.
Others have inherited offshore assets or who established investment entities overseas but failed to disclose the income.
Some even have tried to claim a deduction for income from assets held offshore.
Deputy Tax Commissioner Michael Cranston told Business Insider he expects more taxpayers to disclose their previously undeclared offshore financial activities by the closing date of December 19.
“Unprecedented cooperation between tax authorities and increased ATO capability in detecting and dealing with tax evasion have helped create an environment where there are high risks for taxpayers that don’t disclose offshore income,” he says.
“With the net closing on international tax avoidance and evasion, it’s clear that now is the time for eligible taxpayers to come forward and make disclosures on undeclared overseas assets and income.
“People are heeding the warning that if they don’t take this last chance now, it is only a matter of time before they get caught.”