Tax Technology - Common Reporting Standard: Australia

Tax authorities around the world are increasingly relying on digital methods to collect taxpayer data. Due to the growing demand for tax transparency, a lot of tax authorities are creating sophisticated data-gathering platforms that enable matching and sharing of taxpayer data. The gathered data are then analyzed to increase tax collections, compliance and improve overall efficiency.

Automatic exchange of information plays a big role on tax authorities’ digital transformation to combat cross-border tax evasion.

Automatic Exchange of Information regimes

On July 15, 2014, the Organization for Economic Cooperation and Development (OECD) approved the Standard for Automatic Exchange of Financial Account Information (“AEOI”), also known as the Common Reporting Standard (“CRS”). The due diligence procedures of the CRS are designed to identify accounts which are held by residents of jurisdictions with which the implementing jurisdiction exchanges information under the Standard. This resulted in a wider approach in order to record jurisdictions in which a person is a tax resident.

The CRS is an equivalent of the Foreign Account Tax Compliance Act (“FACTA”), which is the United States variant of an AEOI regime. Since they both share the same goals, a comparison can be made, however, it needs to be emphasized that the CRS reports are different reports to those provided for FACTA. The table below shows the (timing) differences between the CRS and FACTA.

CRS event

CRS timing

FATCA equivalent

Cut-off between Pre-existing and New Accounts

30 June 2017

30 June 2014

Test date for Pre-existing Individual Lower Value Account review threshold

No review threshold

30 June 2014 ($50,000, or $250,000 for cash value insurance or annuity contract only)

Test date for Pre-existing Individual Account High Value review threshold

30 June 2017, 31 December 2017 and 31 December of subsequent calendar years

30 June 2014, 31 December 2015 and 31 December of subsequent calendar years

Test date for Pre-existing Entity Account review threshold

30 June 2017, 31 December 2017 and 31 December of subsequent calendar years ($250,000)

30 June 2014 ($250,000), 31 December 2015 and 31 December of subsequent calendar years ($1,000,000)

Start of New Account due diligence procedures

1 July 2017

1 July 2014

Completion of first review of Pre-existing Individual Accounts that were High Value accounts on 30 June 2017

31 July 2018

30 June 2015

Completion of first review of Pre-existing Individual Lower Value Accounts

31 July 2019; see footnote (1)

30 June 2016

Completion of first review of Pre-existing Entity Accounts

31 July 2018

30 June 2016

First reporting of Reportable Accounts to the ATO

31 July 2018; see footnote (1)

31 July 2015

First exchange of Reportable Accounts with exchange partners

30 September 2018

30 September 2015

Source: Australian Tax Office

(1) Under the CRS legislation, Pre-existing Individual Accounts that are High Value Accounts on 30 June 2017 and Pre-existing Entity Accounts with a balance exceeding $250,000 on 30 June 2017 are reviewable by 31 July 2018 and if identified as Reportable Accounts, must be reported for the reporting period 1 July to 31 December 2017, even if not identified as such until after 31 December 2017. This is an exception to the general rule that an account only becomes a Reportable Account when identified as such. Pre-existing Individual Accounts that are Lower Value Accounts only become Reportable Accounts in the year identified as such, with reporting required in the following year.

The Common Reporting Standard

The Countries which signed the Multinational Competent Authority Agreement on Automatic Exchange of Financial Account Information have committed themselves to disclosure of tax-related financial accounts of corresponding taxpayers under the CRS and sharing the information with other countries. These jurisdictions will disclose the information with the ATO the same way the ATO shares their data with those jurisdictions. Australia has introduced legislation to implement the CRS from July 2017 with the first exchange of information due in 2018.

The CRS requires financial institutions to identify and report non-resident taxpayer information to their local tax authority, which will in turn exchange the information with the tax authorities of participating foreign jurisdictions. This information includes, but is not limited to, the name of the account holder, the taxpayer identification number, address, account, account balance, interest income, dividend income, and income from financial assets transactions.

Common Reporting Standard and Tax Technology

The ATO intends to set up a system that automatically and systematically transfers information to the ATO.

As a start, the ATO has developed a CRS Small Reporter Tool (SRT) for Reporting Financial Institutions (RFIs) which allows RFIs with less than 50 reportable accounts to convert information into a spreadsheet to the required XML-format. The report may then be lodged through the Tax Agent or Business Portals. A nil report can also be generated and lodged if the RFI has no reportable accounts.

Under the CRS legislation, Pre-existing Individual Accounts that are High Value Accounts on 30 June 2017 and Pre-existing Entity Accounts with a balance exceeding $250,000 on 30 June 2017 are reviewable by 31 July 2018 and if identified as Reportable Accounts, must be reported for the reporting period 1 July to 31 December 2017, even if not identified as such until after 31 December 2017. This is an exception to the general rule that an account only becomes a Reportable Account when identified as such. Pre-existing Individual Accounts that are Lower Value Accounts only become Reportable Accounts in the year identified as such, with reporting required in the following year.

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