30/4/2014 – The Australian Government has signed an intergovernmental agreement with the United States Government to improve compliance with the Foreign Account Tax Compliance Act (FATCA) , a new US anti-avoidance tax law taking effect on the 1st of July 2014.
FATCA is aimed at stopping tax abuses by US citizens holdings overseas bank and investment accounts. Financial institutions outside the US that operate accounts held by US taxpayers or residents, or in which US taxpayers or residents hold a substantial interest, will have to report details of these accounts to the US Internal Revenue Service.
What will happen from here is that financial institutions in Australia will have to report to the ATO, who will then in turn report to the IRS, all accounts and holdings that are controlled by a US resident or citizen in Australia. The main section of the Australian expat community who will be affected are obviously those that are based in the United States and have accounts and investments in Australia. One topic that has only just been clarified is that Australian superannuation entities and pooled superannuation trusts are to be exempt beneficial owners. The Association of Superannuation Funds of Australia (ASFA) were vocal in 2012 that Australian financial institutions could violate the Privacy Act in Australia if it adhered to FATCA.
For Aussie expats in the US this shouldn’t be too big of a deal if you’ve always done the right thing. If you’ve always disclosed your Australian assets and investments to the IRS then nothing will change from your disclosure point of view, however you may find it difficult at times to open some accounts in Australia due to the unwillingness of Australian financial institutions to take on more expats in the US due to the increasing compliance burden. As always we recommend that you seek appropriate tax advise from a licensed accountant who has experience in managing expat tax affairs.