Under CRS, the ATO will receive financial account information for Australian residents from foreign tax authorities. This information will not just be provided by OECD countries. Since August 2017, Australia has implemented exchange agreements with 51 foreign jurisdictions including many low or no tax jurisdictions such as Isle of Man, Liechtenstein and Luxembourg. Any Australian resident who receives income overseas, or non-residents receiving Australian income, should ensure they are fully reporting such income to the local tax authorities to avoid potential penalties.
Making a false or misleading statement gives rise to a penalty of between 25 percent and 75 percent of the amount of under paid tax, depending of the seriousness of the non-disclosure. As a result of Australia adopting CRS from 1 July 2017, financial institutions such as banks, investment companies, or insurance companies, are required to collect and report the specified information to the ATO. The ATO has adopted what is known as the ‘wider approach’ where the financial accounts of all non-residents will be reported.
CRS data is to be lodged annually for the previous calendar year. Therefore, the first lodgement date for financial institutions with the ATO will be on 31 July 2018, covering the period 1 July 2017 to 31 December 2017. As the CRS provides the ATO with a powerful data matching tool, Australian resident taxpayers should ensure that details provided to any foreign financial institutions are correct and kept up to date. All foreign income should be declared in income tax returns to avoid penalties and interest.