Banks now collecting information about non-resident customers to hand to tax authorities around the world

09 August 2017 Topics: Banking and financial services, Professional advisers, Tax and revenue, Tax disputes, Trusts

From 1 July 2017, banks are required to collect information from customers that are non-residents. Banks will share the information with the ATO, who will then share it with tax authorities in other countries that have signed up to the Common Reporting Standard (CRS).

Likewise, the ATO will receive information on Australian residents with bank accounts in other countries.

The objective of CRS is to combat international tax evasion. However, it has other consequences.

Have you immigrated to Australia from a country with foreign exchange controls?

Australia is not a renowned tax haven. There are unlikely to be many non resident taxpayers operating bank accounts in Australia evading tax.

However, Australia is perceived as a safe place to keep assets and there are some countries that have restrictions on the amounts of foreign currency that can be sent offshore: China and, historically, South Africa are the two most common examples we see.

There is a concern that the CRS will be used by foreign tax authorities to investigate whether there have been breaches of their foreign exchange controls.

A particular issue arises for immigrant families with trusts. When checking whether a trust is a ‘reportable account’, you need to consider whether any ‘controlling person’ is a non-resident. The definition of ‘controlling person’ is extremely broad. It includes the trustee, appointor, any beneficiary (i.e. not just a primary beneficiary, default beneficiary or beneficiary that has received a distribution) and any other person who actually controls the trust.

Families that have immigrated to Australia, and who have assets in trusts, may still have a ‘controlling person’ who is a resident overseas. The trust may then be subject to CRS, and have its bank account details reported to the overseas tax authorities.

Trust deeds may need to be reviewed to ensure there are no unnecessary terms that will trigger CRS because of the broad definition of ‘controlling person’.

Are you an Australian resident with bank accounts overseas?

Banks and financial institutions overseas have started collecting information about their accountholders.

Banks and financial institutions may ask questions about an accountholder’s residency (for CRS purposes) and citizenship (for FATCA purposes). This process is known as ‘self-certification’. There are penalties for providing false self-certification.

Australian residents with bank accounts overseas will need to ensure they are reporting the income from those accounts in their assessable income.

The ATO no longer has its official amnesty ‘Project Do It’ for undisclosed foreign income. If there is undisclosed income from previous years, there is still scope to reduce the penalties if a voluntary disclosure is made in the correct form before the ATO starts any review activity.

Please contact a member of our team if you would like to discuss.



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This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please let us know.