The Australian Government has signed an intergovernmental agreement with the United States as part of its efforts to improve international tax compliance and to implement Foreign Account Tax Compliance Act (FATCA).
The IGA will reduce the burden on Australian business, minimize costs by simplifying due diligence requirements and widen tax cooperation arrangements between the Australian Tax Office and the US Internal Revenue Service.
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In addition, the agreement will set up a framework to support Australian financial institutions in reporting certain financial account information required by FATCA.
Under the IGA, the automatic exchange of information would be reciprocal.
With effect from 1 July 2014, the FATCA law will require Australian financial institutions to report to the IRS information about financial accounts held by US taxpayers.
Enacted by the US Congress in 2010, the FATCA regulations ensure that the US citizens and residents don’t evade the US taxes by holding offshore accounts.
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By GlobalDataThe government will introduce a legislation to give effect to the IGA as soon as possible as well as a public consultation will start on the draft legislation and its explanatory memorandum.
Australian Treasurer Joe Hockey said that the IGA will also boost tax information-sharing agreements between the two countries to curtail tax evasion.
Steven Munchenberg CEO of the Australian Bankers’ Association said. "This is an essential development in facilitating capital flows into and out of Australia while having best practice regulation."
John Brogden CEO Financial Services Council said: "It is significant for the financial services industry in reducing red tape and will save hundreds of millions of dollars in compliance costs."
