On 28 April 2014, the Australian Government signed an agreement (the intergovernmental agreement) with their U.S. counterparts that will greatly assist Australian financial institutions that must comply with the requirements of the Foreign Account Tax Compliance Act (FATCA) legislation, enacted by the U.S. Government.
The FATCA regime is, at its core, designed to address tax avoidance and money laundering by U.S. entities.
To enable this, the regime requires financial institutions, both within and outside of the U.S., to disclose various matters on their financings and their borrower clients to the U.S. tax authorities.
We have previously outlined the far-reaching impact of FATCA in previous articles here.
The primary aim of the intergovernmental agreement is to reduce the administrative burden and disclosure requirements imposed on Australian financial institutions by FATCA, by permitting the affected financial institutions to disclose the required information to the ATO, who will in turn pass that information on to the U.S. tax authorities.
Given that FATCA requirements are due to commence in Australia on 1 July 2014, it is very timely that Australia and the U.S. have settled this intergovernmental agreement. The Australian Federal Government plans to present the intergovernmental agreement to parliament for its approval in 2014 and to propose implementing legislation with the goal of having the intergovernmental agreement enter into force by the end of September 2015.
A full copy of the intergovernmental agreement is available on the Federal Treasury website, or from Gadens.