The Australian Taxation Office (ATO) is preparing for a major crackdown on tax haven arrangements and is urging Australians to get their tax affairs in order.
Its message is simple — Australian residents are subject to tax on their income from all sources inside or outside of Australia — and the ATO has released an information booklet outlining its concerns with tax haven arrangements and advice on how to report offshore income.
The crackdown comes as an effort to encourage a fairer tax burden for the majority of Australians and to ensure community confidence in the tax system, according to the ATO, which is opening its doors to those with concerns about their tax affairs.
To encourage people to do the right thing, the ATO is offering reduced penalties for voluntary disclosure. Penalties, which may be as high as 75 per cent of the taxable shortfall, are being cut back to as little as 5 per cent of the tax payable.
Since July this year, the ATO have had 91 voluntary disclosures totalling $4.6 million in taxable income, with one disclosure involving $700,000 in unreported income. And the department anticipates further disclosures to be made as the result of greater availability of advice about the laws. The ATO are appealing to Australians’ hip pockets — those intentionally disregarding the tax law will be hit with hefty penalties.
While there are legitimate reasons for dealing with a tax haven, arrangements designed to avoid paying the correct tax in Australia undermine confidence in the tax system. As a result, the ATO is sharing greater information with other administrations, using more sophisticated analytical tools and changing laws to help detect and deal with these arrangements.
At a recent chartered accountants technical conference in Sydney, ATO acting commissioner of taxation Jennie Granger commented on negotiations between the ATO and Antigua Barbuda, the Netherlands Antilles and Bermuda into tax information exchange agreements. Granger said negotiations with a further seven tax haven countries are underway and another two negotiations will commence in the next two months.
“These arrangements increase the transparency of cross-border transactions and complement the intelligence we already gather through AUSTRAC, overseas revenue authorities and other government departments and law enforcement agencies,” Granger said.
