The Australian Taxation Office (ATO) has announced that it will be giving Australian taxpayers the opportunity to declare monies they have invested offshore under an amnesty program, namely Project DO IT (Disclose Offshore Income Today).
Under the amnesty, disclosures made prior to 19 December 2014 will be treated favourably by the ATO.
The program, initiated by Commissioner of Taxation Chris Jordan, will temporarily reduce the penalties for taxpayers that hand over information regarding their hidden accounts over the past four years. This in essence means that taxpayers will receive a reduced tax shortfall penalty and protection from criminal charges.
This will in effect be the ‘last chance’ for tax evaders to make peace with the ATO as, after greater information sharing powers come into force, the Commissioner has promised the penalties will be worse for people when, not if, they are caught out.
“Now, 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 actually dying,” Mr Jordan said. “It’s just a matter of time before you’ll be caught out”.
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 voluntarily 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.
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 assurances 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” form, found on the ATO website and submit this along with any other information sought by the ATO before 19 December 2014.
Further information can be found on the ATO website here.