Australian expats should prepare for a new round of ATO review and audit activity. The ATO has announced a list of overseas banks it will request information from. The list includes key banks such as the ANZ, HSBC, Citibank, Deutsche Bank, Bank of China and Credit Suisse.
This information will be used in identifying Australian tax residents receiving income in offshore bank accounts.
I’m an expat – why am I affected?
In our experience, expatriate Australians living and working overseas, but with some residual connections to Australia, are often targeted in ATO review and audit activity. This has become increasingly common as the ATO’s data matching capabilities increase.
In recent years the ATO has applied an expansive meaning to its interpretation of the word ‘resides’ in tax law, often arguing that a person who has sufficient connections (or ‘continuity of association’) with Australia remains a tax resident despite living and working overseas: see our previous alerts here and here.
We were recently involved in the successful AAT application in Dempsey (see our alert here) where the AAT rejected an expansive interpretation of ‘resides’.
However, the ATO’s Decision Impact Statement from Dempsey indicates that the ATO will continue to pursue Australians working overseas who retain connections with Australia.
How do I manage a response to the ATO?
If you are contacted by the ATO, it is important that you organise a detailed response and provide relevant evidence. The first impression is the most important.
In addition to providing evidence, the response needs to include explanations for why you are a non-resident, based on the four residency tests in the Australian domestic tax law and any ‘tie-breaker’ tests if you were living in a country with a double tax agreement with Australia.