Under currently envisaged FATCA (the US Foreign Account Tax Compliance Act) arrangements, Australian financial institutions will have to enter, by 30 June 2013, into a special agreement with the US Internal Revenue Service – non US financial institutions will be required, from 1 January 2014, to report directly to the IRS certain information about financial accounts held be US taxpayers. Australian superannuation funds are seeking a carve out from the FATCA arrangements.
US Citizens are already under an obligation to report to the IRS where at any point in time during the financial year they held at any one point in time more than $10,000 in foreign bank / financial institution accounts.
ASFA has called on the Government to quickly conclude an intergovernmental agreement (IGA) between Australia and the US (based on the published US Model IGA) for the purposes of the proposed US Foreign Account Tax Compliance Act (FATCA). In a submission to Treasury, ASFA also called on the Government to ensure that the IGA includes an exemption for Australian regulated superannuation entities. According to ASFA, an IGA is better than the alternative of requiring individual agreements between Foreign (non-US) Financial Institutions (FFIs) based in Australia and the US authorities.
ASFA noted that the current FATCA timeframe means that an FFI will have to enter into a special agreement with the US IRS by 30 June 2013. Under the agreement, FFIs will be required from 1 January 2014 to report directly to the IRS certain information about financial accounts held by US taxpayers, or by foreign entities in which US taxpayers hold a substantial ownership interest and to withhold money from payments made to non-compliant FFIs and certain individual investors. Unless an FFI is registered with the IRS, ASFA notes that it will be exposed to a 30% withholding by a participating FFI on any receipts of US source income, as well as the gross proceeds from the sale of securities that generate US source income.
Provided by Thomson Reuters’ Superannuation News