The OECD’s Common Reporting Standard (CRS) became effective in Australia on 1 July 2017. The first report for the 6 month period ending on 31 December 2017 is due on 31 July 2018. Reporting entities should be gearing up to make sure their due diligence procedures are done, and their reportable accounts are identified to ensure they meet this deadline.

Broadly, under CRS, Australian Reporting Financial Institutions (RFIs) must:

  • Comply with due diligence procedures in order to identify account holders that are not Australian-resident; and
  • Report certain information on those accounts to the ATO annually.

The first CRS report due to be lodged with the ATO is due on 31 July 2018.

The first report will cover:

  • Pre-existing Individual Accounts with a value exceeding $1m as at 30 June 2017 that are Reportable Accounts;
  • Pre-existing Entity Accounts with a value exceeding $250k as at 30 June 2017 that are Reportable Accounts; and
  • Reportable Accounts opened during 1 July – 31 Dec 2017 (this is the first ‘year’ for CRS purposes).

What are Reportable Accounts?

Reportable Accounts are accounts held by:

  • a non-resident; or
  • a Passive NFE with one or more non-resident Controlling Persons;

but excluding those accounts held by listed companies and their related entities, government entities, international organisations, central banks and other financial institutions.

A Passive NFE is an entity that is:

  • an Investment Entity located in a non-CRS participating jurisdiction; or
  • any other entity that is not a Financial Institution and not an “Active NFE” (i.e., an entity where less than half its income and assets are attributable to deriving passive income, a listed entity, a holding entity for one or more subsidiaries which are not Financial Institutions, a tax exempt entity, etc.)

The FATCA “rule of thumb”

Generally, the same entities that need to report for FATCA (because they are Foreign Financial Institutions as defined under the FATCA regulations and Australia-US Intergovernmental Agreement) are RFIs for CRS.

Further, the same accounts that can be reportable accounts for FATCA (being those held by US persons), are generally also reportable for CRS (which now includes those held by any foreign resident).

What this means is, for example, a Trust that is a FFI for FATCA, should also be a RFI for CRS, and will need to report unitholdings held by foreign residents (in the same way they are currently required to report unitholdings held by US Persons for FATCA).

What do you need to do?

RFIs will need to have reviewed their Pre-Existing Accounts (i.e. those opened before 1 July 2017) and collected self-certification forms from accounts opened since 1 July 2017 in order to identify accounts which need to be reported. If there are no accounts that need to be reported, the RFI is not required to lodge a CRS report (although the ATO recommends lodging a nil report).

CRS reports must be lodged in the approved CRS XML Schema format. RFIs with less than 50 reportable accounts can download the ATO’s CRS Small Reporter Tool which will convert information input to an excel spreadsheet into the required XML Schema format. For RFIs with over 50 reportable accounts, we can arrange for the provision of a software solution for converting spreadsheets into XML Schema reports.