04 June 2015

Global information exchange expands beyond FATCA - Australia signs OECD Competent Authority Agreement relating to Common Reporting Standard

This article was written by Suzanne Gibson, Sylvester Urban and Anthony Mourginos.

Australia’s entry into the OECD Common Reporting Standard Multilateral Competent Authority Agreement means that Australian financial institutions will have to comply with FATCA-like obligations in respect of account holders resident in more than 90 jurisdictions. The obligations under the Common Reporting Standard (CRS) will be broadly based on, but not identical to, the FATCA due diligence and reporting obligations imposed on foreign financial institutions.

Common Reporting Standard

Yesterday Australia signed the OECD Common Reporting Standard Multilateral Competent Authority Agreement "to catch taxpayers using hidden offshore bank accounts to evade Australian tax".

In a media release, Federal Treasurer Joe Hockey said the Agreement, which enables the automatic exchange of common reporting standard information between countries, is "key to cracking down on those who deliberately try to avoid paying their fair share of tax".

The CRS will impose similar due diligence and reporting obligations on financial institutions to the U.S. Foreign Account Tax Compliance Act (FATCA), in respect of financial accounts owned by residents of any OECD member country that has committed to the CRS. The Australian Taxation Office will automatically receive information on investment income and balances of financial accounts held by Australians in other countries and use it to check income declared in Australian tax returns.

Differences between CRS and FATCA

The CRS is largely based on the FATCA Model 1 intergovernmental agreement. Significant differences include the following:

  • the definition of “Reporting Financial Institution” is broader under the CRS than under FATCA;
  • even though you do not maintain financial accounts under FATCA, you may maintain financial accounts under the CRS;
  • as the CRS will require a broader range of information than FATCA, and more than 90 countries have committed to the CRS, significant changes may be required to your systems; and
  • you will be required to perform due diligence on certain investment entities established in non-CRS jurisdictions and report on any relevant controlling persons.

Timing

Before the CRS can apply in Australia, the Government must pass implementing legislation to give it the force of law and overcome privacy law concerns.

Although due diligence obligations commence earlier for certain “early adopter” countries, Australia has announced it will implement the CRS from 1 January 2017 and first exchange information in 2018.

Earlier this year, Australia signed a declaration with Switzerland for the automatic sharing of CRS information. This was on a bilateral basis.

Next steps

You should start your CRS preparations now.

Our team has been closely monitoring these developments. Please contact us if you would like to discuss how Australia’s implementation of the CRS might affect your business.

Share on LinkedIn Share on Facebook Share on Twitter
    You might also be interested in

    To help you stay on top of all the COVID-19 content this week we have compiled our insights into one easy-to-access location, updated on a weekly basis.

    03 April 2020

    On 23 March 2020, it was announced that Australia and Singapore have finalised negotiation of the Digital Economy Agreement (“DEA”) between the nations. This brings to a close discussions on the...

    03 April 2020

    As COVID-19 evolves it will have a significant impact on investment funds and their trustees and managers, both directly and indirectly through the broader market, people and economic effects. While...

    01 April 2020

    Nearly 21 years after China established the big four national asset management companies (AMCs) to acquire, manage and dispose of non-performing loans (NPLs), the Chinese government has approved the...

    30 March 2020

    This site uses cookies to enhance your experience and to help us improve the site. Please see our Privacy Policy for further information. If you continue without changing your settings, we will assume that you are happy to receive these cookies. You can change your cookie settings at any time.

    For more information on which cookies we use then please refer to our Cookie Policy.