Australia Seeking Offshore Income Disclosures

June 2, 2010 International Tax CooperationOffshore BankingOffshore TaxationTax HavensTaxation in Australia

Sydney HarborThe Australian Government is reminding tax payers of its current offshore income declaration initiative, which offers greatly reduced penalties in exchange for voluntary sharing of information.

On June 1st the Government of Australia issued a media release urging tax payers with undeclared offshore incomes to utilize the current Voluntary Disclosure Initiative. Michael D’Ascenzo, Tax Commissioner of Australia, stated that the program will end on June 30th and concessional penalty arrangements will no longer be offered upon the initiative’s completion. No indication was given as to the possibility of another program in the near future.

According to the Australian Tax Office (ATO), under the conditions of the program, an individual disclosing additional undeclared incomes exceeding AUD 20 000 (approx. USD 16 735) for a given tax year, will only face a shortfall penalty of 10 percent. Australian nationals who reveal offshore incomes below the threshold will not face any shortfall penalty. Additionally, the general interest charge (GIC) on unpaid taxes will be reduced to nil for the years up to and including the 2002 tax year. For the 2003 and 2004 tax years, the GIC will be reduced to the base rate. The ATO has also stated that it is willing to offer anonymous indications of whether a potential volunteer could face criminal prosecution as a result of the source of their undeclared incomes.

The ATO emphasized that the Australian Government currently has 25 separate bilateral international tax information exchange agreements. Subsequently the ATO is experiencing a greater level of tax transparency and international taxation information cooperation, which makes discovering and prosecuting tax evaders easier than in previous years. Under typical ATO procedure, undeclared offshore incomes discovered through an audit can lead to penalties of 90 percent, along with interest charges, and repayment of unpaid taxes. Michael D’Ascenzo added to the statement, saying “The message we want to get across to people is come forward now, don’t wait for us to come to you.”

Photo by mdelamerced