ATO offer to declare offshore income

Tax Commissioner Michael D’Ascenzo has said the net is closing on tax havens, as he announced a new offer for people who may not have declared all income from offshore activities. This is a chance for people with undeclared income, for example interest earned offshore, to contact the Tax Office and sort out their affairs. The offer is open until 30 June 2010.

“This new offer provides a good opportunity for people who want to do the right thing to get their tax affairs in order,” Mr D’Ascenzo said.

“Our ability to trace fund flows around the world is constantly expanding. We work closely with banks and other overseas tax jurisdictions to identify people with undeclared income — including those with highly complex and sophisticated arrangements.

“For example, Australia has signed nine tax information exchange agreements with other countries and we’re working on more. This complements our existing double taxation agreements with around 40 overseas jurisdictions.”

The Tax Office made a similar offer in 2007. As at the end of October 2009 more than 3,000 disclosures had been made, totalling over $306 million in omitted income and raising nearly $65 million in liabilities. Compared to 2007, the new offer increases the shortfall penalty from five per cent to 10 per cent where a person’s additional income from offshore activities is more than $20,000 in a tax year. Those with additional taxable income of $20,000 or less in a tax year will not have to pay a shortfall penalty for that year. This remains unchanged from the previous initiative.

“Tax advisers have told us many of their clients with undisclosed foreign income want to come forward to set things right, but are concerned about the consequences of doing so — particularly the potential for criminal investigation,” Mr D’Ascenzo said.

“People can now approach us anonymously for an indication of whether we would initiate an investigation to determine whether there is a potential breach of the criminal law. In making this decision, we will often seek advice from an appropriately qualified panel which will include external members.

“This offer is not valid if we commence an audit so I remind people again — contact us before we contact you.

“There’s a much higher price to be paid later if we discover undeclared income through an audit process. Penalties can be as high as 90 per cent, and we will seek prosecution in serious cases.

“There is nothing wrong with holding an offshore account or investing overseas as long as you pay any Australian tax due, however we will continue to focus on the misuse of offshore financial arrangements.”

The Tax Office matches data supplied by overseas revenue agencies and AUSTRAC with income tax returns to identify undeclared foreign income, as well as data from financial institutions to identify Australian residents involved in foreign transactions.

Please contact ARW if you want to make a voluntary disclosure of your offshore income.