The ATO announced a further voluntary disclosure program on March 27, 2014 for those with foreign income and assets. This comes as the G20 endorses OECD initiatives to strengthen the sharing of tax information worldwide. The ATO’s message is that the net is closing and taxpayers will be caught and the penalties harsh if a voluntary disclosure is not made.
Project DOIT is open until December 19, 2014. The concessions open to taxpayers making use of the amnesty are that their offshore income will be assessed for the last four years only and the penalty applicable to any tax shortfall will be a maximum of ten per cent of the tax debt instead of a possible 90 per cent. In addition, they will not be subject to investigation by the ATO and criminal prosecution.
We recommend that taxpayers with undisclosed foreign income and assets give serious consideration to making a voluntary disclosure under the terms of the amnesty. The 4-year limitation on assessments and the assurance of no criminal prosecution are elements that were not offered by the ATO in its 2007 and 2010 voluntary disclosure programs. The ATO has established a dedicated team, email address and telephone number for Project DOIT and the process of making a disclosure involves the submission of specific form to this team. It is generally helpful to supplement this with a letter setting out the taxpayer’s position or other information as the case requires.
Gadens understands that a voluntary disclosure involves more than just tax issues and there may be sensitive commercial, family, social security and other issues involved. Legal professional privilege can be advantageous in this context to maximise the confidentiality afforded to sensitive issues.
Generally all persons subject to Australian tax are invited to participate in Project DOIT but the terms of the amnesty will not apply if the ATO is already conducting an audit of the taxpayer (including a covert investigation of which the taxpayer has no knowledge) or has already sent an information-gathering notice to the taxpayer. For those who have already made a voluntary disclosure where the amended assessments have not yet issued, it may be possible to have the matter brought within the terms of Project DOIT.
Internationally the OECD has been working closely with the G20 to improve information sharing worldwide, with tax evasion a big driver behind this. International movements include:
- Australia now has treaties with 42 countries allowing the automatic exchange of information.
- The Multilateral Convention on Mutual Administrative Assistance in Tax Matters (Multilateral Convention) provides for all possible forms of administrative co-operation between States in the assessment and collection of taxes, in particular with a view to combating tax avoidance and evasion. This co-operation ranges from exchange of information, including automatic exchanges, to the recovery of foreign tax claims. As of December 2013 the Multilateral Convention had been signed by 64 countries including Australia and Switzerland.
- On 13 February 2014 the OECD released the Standard for Automatic Exchange of Financial Account Information that calls on jurisdictions to obtain information from their financial institutions and automatically exchange that information with other jurisdictions on an annual basis.
The ATO is pointing to all of this activity on the international front to support its claims that taxpayers who do not voluntarily disclosure offshore income and assets will be caught. Taxpayers who do not use this opportunity to voluntarily disclose would then be exposed to much larger penalties, a potentially unlimited review period and criminal sanction.