Jurisdiction - Australia
Reports and Analysis
Australia – State Signs FATCA Intergovernmental Agreement With US.

8 May, 2014

 

Legal News & Analysis – Asia Pacific – Australia – Tax

 

The Australian and United States governments have now signed an intergovernmental agreement (IGA) relating to the U.S. Foreign Account Tax Compliance Act (FATCA), providing certainty for Australian financial institutions ahead of the commencement of the substantive FATCA requirements on 1 July 2014.

 

The IGA is intended to ease the compliance burden for Australian financial institutions and overcome legal impediments to FATCA’s implementation in Australia.

 

The Australian Treasury has also released exposure draft legislation to implement Australia’s obligations under the IGA. This will require affected Australian financial institutions, from 1 July 2014, to carry out due diligence procedures in relation to clients and report information annually to the ATO in respect of certain clients likely to be US taxpayers. This information in turn will be reported to the US Internal Revenue Service.

 

Benefits Of IGA

 

Key benefits are that affected Australian financial institutions will:

 

  • not need to enter into an agreement with the IRS,
  • generally not be subject to withholding, and
  • not need to close the accounts of any ‘recalcitrant’ account holders.

 

Compliance Requirements

 

However, the IGA means FATCA becomes mandatory for affected Australian financial institutions as from 1 July 2014 and imposes various compliance obligations (including due diligence procedures on existing and new clients and annual reporting to the ATO). Although the substantive requirements commence on 1 July 2014, the various FATCA requirements will be implemented in stages.

 

Exemptions

 

There are numerous exemptions for certain Australian financial institutions (including superannuation entities and public sector superannuation schemes) from the FATCA requirements as well as exemptions for certain products.

 

Next steps

 

To be FATCA-ready, affected Australian financial institutions should:

 

  • determine which products they offer are subject to the FATCA requirements under the IGA,
  • determine how due diligence procedures will be carried out (including reviewing application forms and account opening procedures) and implement required system changes,
  • register with the IRS as a deemed compliant financial institution by 1 January 2015 and obtain a Global Intermediary Identification Number (GIIN),
  • review their offer documents and terms and conditions for affected products and determine whether they need to be amended. If they do, and they haven’t been updated recently, determine whether other amendments should be made at the same time for other recent changes in law eg the recent privacy changes and changes to fee table disclosures,
  • consider what client communications to make, and
  • implement FATCA compliance procedures.

 

herbert smith Freehills

 

For further information, please contact:

 

Fiona Smedley, Partner, Herbert Smith Freehills

fiona.smedley@hsf.com

 

Homegrown Tax Law Firms in Australia

 

Comments are closed.