|Summary: The ATO is targeting your offshore earnings, no matter how small. You have until December to take part in an amnesty ... or roll the dice on bigger penalties.|
|Key take-out: People on the ATO’s hit list include anyone who has worked overseas and still has assets there, and those formerly from other countries who might be earning incomes and not declaring them.|
|Key beneficiaries: SMSF trustees and superannuation accountholders. Category: Superannuation.|
The word “amnesty” suggests a few things when its offered by a government authority.
Firstly, it states the authority knows that an activity is happening. Second, the authority knows it is reasonably widespread, but it doesn’t know exactly who’s doing what. And third, it suggests that the authority might be on the verge of getting higher-quality information that would allow them to know, in better detail, who is doing it, and by how much.
The Australian Tax Office has signalled exactly that with its announcement of an amnesty on offshore earnings for Australians. It’s called “Project DO IT”.
And it is not targeting multinationals worth millions of dollars trying to evade tax through tax havens and Swiss bank accounts, or wealthy individuals. That’s largely considered to be Project Wickenby, which has included some well-known Australians, has raised $437.6 million, and is also collaborating with Project DO IT.
Project DO IT is seeking confessions from you – mums and dads, family trusts and small and medium businesses.
The ATO wants you to disclose your overseas pensions, bank accounts, business dealings, asset ownership and inheritances – and any other financial assets from which you might be earning an income, have earned an income in the past, or could or have sold for a capital gain, on which tax should be paid.
And, for good measure, anything that you believe you might have over-claimed a tax deduction on in the past.
The ATO aims to catch people, and is offering an amnesty to include situations such as:
- People who have worked overseas and still have assets there.
- Those formerly from other countries who might be earning incomes from assets or pensions who have not been declaring them.
- Businesses with undeclared offshore assets or interests.
- The children and grandchildren of migrants who have inherited offshore assets, who want to do the right thing and bring these assets back into a legal structure.
The ATO last week laid down a deadline of December 19 this year to dob yourself in for whatever you’re earning from overseas – just in time to assuage your guilt for Christmas.
And it reckons it will get you eventually anyway, even if you think you can outrun them.
“This is an opportunity for all Australians who have engaged in previously unreported offshore financial activities to get their tax affairs in order,” the ATO said.
“Increased international cooperation means the net is closing in on tax evaders around the world.
“In recent years, information sharing between countries has increased significantly. Banking data is being exchanged routinely and automatically and the G20 is promoting global tax transparency.
“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.”
Right, so it’s time to declare that Swiss bank account I opened after watching Wall Street’s Gordon Gekko in the 1980s. (Just kidding, Mr Commissioner.)
International cooperation is on the increase – there’s no doubt about that. But the ATO doesn’t want you to believe that you’ve got until December to dob yourself in. Its warning reads like its part bluff, part loaded gun, aimed at your temple.
“To receive the benefits of Project DO IT, you must make a truthful disclosure to us … before 19 December 2014 ... Until you lodge, our normal compliance activities will continue and if we detect you first, you will not be able to participate.”
“Gotcha first!” people aren’t the only ones who can’t participate. There are plenty of people who might wish to get themselves out of a hole, but are excluded from participating in the amnesty.
If you’re already in warm, hot or boiling water with the ATO, forget about the amnesty – you’re too late. The ATO has specifically stated that if you’re already being audited, investigated or have been requested to provide information in regards to offshore income, this amnesty is too late to save your bacon.
You will also be excluded if you were involved in promoting or marketing tax evasion schemes, have been previously convicted for tax crimes, or the assets you’re intending to divulge are the proceeds of crime.
So, this is not a way for members of crime families, Mafioso, triad, Russian mob, drug syndicates or gun runners to be able to become legit “Downunder”.
What can you do?
If you think you’d like to participate, start gathering your information together and be ready to act sooner rather than later.
There’s a seven-page form available on the ATO’s website at: http://www.ato.gov.au/uploadedFiles/Content/SME/downloads/PGH_39689.pdf
Contact your advisers (tax, financial or legal) to find out how you might be able to prepare the information properly for the ATO. But be aware that the ATO, as part of Project DO IT, is going to be targeting professionals who have been involved in setting up offshore structures for clients. If that’s your accountant, you might not get a great reception and might wish to get advice from another professional who was not involved.
What will the penalties be?
Given it’s an amnesty, the ATO is showing some leniency. Generally, it is only going to go back four tax years. Penalty tax will also be limited to 10% (where the penalties can be up to 90% outside of this amnesty), on top of whatever you were due to pay in tax and interest.
If the income for a tax year is less than $20,000, the ATO has indicated that there will be no penalty tax.
And, if you report yourself under this scheme, and are accepted (see exclusions above), then you will not be investigated for criminal offences or be referred to other agencies for criminal offences.
But don’t think you can go and announce half your sins and get away with it. If the ATO discovers false or misleading information, or you object to any fines or penalties imposed, then you fall outside of the guarantees offered through Project DO IT.
The ATO’s likelihood of success?
The number of global agencies that are sharing information is growing. The ATO is part of that. For matters relating to FY13, the ATO raised around $480 million in adjusted tax, interest and penalties.
The information contained in this column should be treated as general advice only. It has not taken anyone’s specific circumstances into account. If you are considering a strategy such as those mentioned here, you are strongly advised to consult your adviser/s, as some of the strategies used in these columns are extremely complex and require high-level technical compliance.
- The SMSF Professionals’ Association of Australia (SPAA) and Macquarie is launching a survey aimed at identifying the range of business models in the SMSF sector, targeting financial advisers, accountants, administrators and stockbrokers. SPAA chief executive, Andrea Slattery, says the survey is designed to improve efficiencies and drive growth. The findings will be shared in July.
- The Australian Securities Investment Commission (ASIC) says its greatest challenge is superannuation, and that one of its main areas of focus will be SMSFs. “It’s our number one challenge, frankly, because with superannuation investing, most of the time the products that we regulate are what the gatekeepers regulate,” said ASIC’s chair Greg Medcraft at the ASIC Annual Forum last week. “Super cuts across everything – particularly SMSFs, which cut across products and gatekeepers.”