Tax Amnesty for Offshore Income and Assets - Announced by the ATO

The ATO has recently announced a tax amnesty under “Protect DO IT” that allows eligible taxpayers to voluntary disclose to the ATO unreported foreign income and assets before 19 December 2014 and take advantage of certain concessional benefits including a four-year look back limit and a 10% shortfall penalty.

These voluntary disclosures allow taxpayers to take advantage of reduced tax shortfall penalties (10%) and protection from criminal investigations by the ATO. Further the ATO will only look at unreported and incorrectly reported amounts in tax returns for those income years where the time period for amending assessments has not yet expired (generally four years). Previous schemes were not limited to a four-year period and in practice went back over periods as long as 10 years. 

Global crackdown on tax havens

The commissioner has warned taxpayers that international efforts to crack down on tax havens are ramping up, “As governments around the world step up their data sharing and harness powerful technology to find tax cheats, the concept of the “tax haven” is dying. It’s just a matter of time before you’ll be caught”. The Commissioner has also encouraged taxpayers to make disclosures to avoid stiff penalties and risks of criminal prosecution, “if you’ve got international tax liabilities, act now and come forward and we’ll bring you back into the system with a heavily reduced penalty. If you don’t declare your interests, you’ll be caught and penalised.” In this regard, information sharing between foreign governments has increased in recent years, with the G20 promoting tax transparency and the automatic transfer of some banking data. 

Advantages for taxpayers 

This initiative only re-examines those tax years where the time limit for amending assessments has not yet expired  (generally four years), as opposed to the unlimited time available to the ATO for reassessment if they suspect fraud or evasion. This means that the ATO will only assess additional tax on those years, and cannot go back any further. Taxpayers who take part in the initiative can also take advantage of the following benefits:

• A small tax shortfall penalty of 10% plus interest (which otherwise can be as high as 90% if
  the ATO detects a shortfall first);
• No shortfall penalty for additional income of $20,000 or less in a tax year;
• The ATO will not conduct criminal investigations for fraud or evasion or voluntary refer a taxpayer to
  other law enforcement agencies; and 
• The ATO will give assurances of the tax effects of winding up any offshore structures or transferring
  offshore assets to Australian entities. 

Eligible taxpayers and overview:

Eligible taxpayers include all taxpayers except those where ATO: 

• Is already auditing the taxpayer in relation to the omitted offshore income or capital gains or
  over-claimed deductions; 
• The taxpayer has been involved in promoting or marketing tax evasion schemes
  (with some possible exceptions);
• The taxpayer is already under criminal investigation concerning tax-related criminal offences or
  the foreign assets or income where derived from serious criminal offences unrelated to tax; or
• The taxpayer has not complied with specific obligations from a previous offshore voluntary
  disclosure initiative that they were involved in. 

Factors to consider:

Before deciding to take part in this initiative, taxpayers should be aware that:

• If the ATO detects you before you make a disclosure, the initiative will not apply;
• If you provide false or misleading information in any disclosure, the Commissioner of Taxation may
  not be bound by the terms of this initiative;
• If you wish to dispute any tax, penalties or interest imposed as the result of a disclosure, the assurance
  given by the ATO under this initiative will not apply;
• The initiative operates as a ‘single package’ suggesting that the terms are not flexible and must be
  accepted as provided by the ATO;
• The ATO does not grant amnesty from investigation by other law enforcement agencies or prosecution
  by the Commonwealth Director of Public Prosecutions; and 
• There are no exemptions for reporting obligations under the Anti-Money Laundering and Counter
  Terrorism Financing Act 2006 where offshore assets are being transferred or repatriated under
  this initiative. 

What do taxpayers have to do?

Taxpayers are required to fill in a “disclosure statement” found on the ATO website and submit this along with any other information sought by the ATO before 19 December 2014.

Please contact us if you require any further information or assistance on this matter.


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