International Family Business Blog

Australia signs US FATCA accord

Australia’s Treasurer Joe Hockey announced yesterday that Australia and the US “…signed an intergovernmental agreement (IGA) to reduce the burden on Australian financial institutions in complying with the United States’ Foreign Account Tax Compliance Act (FATCA).”

The treasurer commented that the agreement would assist Australian financial institutions to comply with FATCA and minimise the costs of doing so. He also mentioned that “…it broadens arrangements between the Australian Taxation Office and the US Internal Revenue Service” and that it “…will also improve existing tax information-sharing arrangements between Australia and the United States, for the purpose of presenting tax evasion.”

A copy of the IGA may be downloaded from-http://treasury.gov.au/Policy-Topics/Taxation/Tax-Treaties/HTML/Intergovernmental-Agreement

Last minute Budget tips for Treasurer Hockey

I have some “low hanging fruit” suggestions for Joe Hockey’s Budget.

(Joe Hockey - Treasury photo)

Firstly, when capital gains tax (CGT) was introduced circa 1985, a number of inexplicable sops to the wealthy were provided. Three of these could safely be ditched immediately, purely on equity grounds and arguably without breaking election promises.

The CGT “Grandfathering

Most Australians are probably unaware that when CGT was introduced, the wealthy benefited from an effective lifetime exemption on capital they already held. This economy distorting exemption remains today and continues to provide unjustifiable benefits to “old money” families.

I suggest that all previously “grandfathered” assets be brought into the CGT net as from Budget night. Such assets could be deemed to have a “cost base” equivalent to their professionally assessed market value on Budget night.

The “Classic car collector’s” CGT exemption

It will also be unknown by most Australians that profits on the disposal of classic cars by wealthy collectors has always been exempt from CGT. 

I suggest that these collectibles also be brought into the CGT net as from Budget night. 

The mega-mansion CGT exemption

When CGT was introduced, the family home was excluded from the CGT net. This exemption applies equally to a $332,000 home unit in Blacktown or a $33,000,000 mega-mansion in Point Piper. It is difficult to see the equity in this.

I suggest that the family home CGT exemption be capped as a lifetime (indexed) profit amount of $2,000,000 as from Budget night.

Secondly, the current superannuation nest-egg rules encourage the practice of double-dipping into the Age Pension system. These rules should be tightened-up to avoid rorting.

Make the standard preservation age 65

I suggest it is reasonable that those with superannuation pensions should only be entitled to begin them at the same age as those who rely on the Age Pension (i.e. at 65 or later official retirement age).

Make all superanuation payouts pensions

The generous tax benefits provided for retirement should not be diverted to grand tours or house renovations, etc. Superannuation should provide pensions, not capital payments for other purposes.

I suggest that all superannuation payouts be limited to regulated monthly pension payments as from Budget night.

Make superannuation payments taxable

The tax exemption for superannuation payouts to those over 60 can no longer be justified on either economic or equity grounds.

I suggest that all superannuation payments be subject to a concessional 15% rate of tax as from Budget night.

ATO's “Get out of a scheme” offer

The Australian Tax Office (ATO) has just posted an offer on their “Tax Planning” pages suggesting to taxpayers that “If you are already involved in a tax avoidance scheme and this affects returns you’ve lodged in previous years, you should call us” - www.ato.gov.au/General/Tax-planning/Get -out-of-a-scheme/

Helpfully, they even provide a 1800 number for you to call. A little later they add: “You can also talk to your tax agent or an independent advisor”

Taxpayers who contemplate “fessing-up” to involvement in what might be a “dodgy” tax scheme might well pause for thought here. If the scheme is truly “dodgy” there may be a downside to talking to the tax agent who may well have advised you to enter into the scheme.

Talking first to an independent adviser may be the more prudent step. It may be that such an independent review will identify criminal or quasi-criminal risks involved in the arrangement. In that event, an experienced independent adviser will suggest the early involvement of a lawyer experienced in handling voluntary disclosures to the ATO. This gives the taxpayer the added protection of legal professional privilege in their dealings with the ATO.

However, the ATO “offer” should nevertheless have attraction for many taxpayers. The potential for negotiation of reduced penalties is one that should not be lightly dismissed. In this connection, the ATO’s intelligence gathering capability has improved considerably over recent years, so the likelihood of detection and prosecution of participants in “dodgy” schemes is quite high.

Indeed, the ATO’s “Tax Planning” pages include a “dob-in page” - www.ato.gov.au/General/Tax-planning/Report-schemes-and-promoters/

© 2017 Rollo & Company Pty Ltd