Do you have assets or income overseas that the tax office don’t know about?

Current as of December 2014
ATO amnesty about to finish!

Further to our previous discussions, you may have also seen in the media recently about the Australian Taxation Office (ATO) amnesty on disclosures of assets or income overseas that they have not previously been made aware of. Well this ATO initiative, called Project DO IT,  is about to close on 19 December 2014.

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 where they are able to go back and review assessments under the tax legislation. This Period of Review will be different for taxpayers depending on the type of 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 the 2010 year onwards but his 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 then the 10% penalty may not be charged. Additionally, the administrative practice of the ATO is that if the penalty is less than $1,000 then it is unlikely to be charged.

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

You are able to access the initiative unless you breach one of the specific exclusions below

  • The ATO have 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 serious 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.

So what do you do now? There is a standard form which can be accessed on the ATO website to disclose all the relevant information that the ATO will be after. Alternatively, if you do not know all the information now, you can put in an Expression of Interest ( a simple email) to the Project DO IT section of the ATO by the 19th December to advise them that you have assets and income to disclose but you need a bit of extra time to get the information together. They will give you 90 days to do this and then lodge the relevant form.

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

The ATO have some major initiatives starting in the new year, where they will be able to access financial records from a much larger number of countries and in a lot more depth. They say, that if you don’t utilise this initiative, you are likely to be caught over coming years and you will be heavily penalised if the ATO find the assets instead of you coming clean about them first.

If you would like to discuss this initiative please contact us urgently to determine if you need to make any disclosures before the 19th December.

DISCLAIMER
This newsletter has been produced by Stanley & Williamson as a service to its clients and associates. The information contained in the newsletter is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas contained in this newsletter, it is imperative you seek specific advice relating to your particular circumstances. Liability limited by a scheme approved under Professional Standards legislation.