30th April 2014
The US and Australia have signed an agreement to cooperate on the sharing of tax information. It is one of several intergovernmental agreements (IGA) between the US and individual countries ahead of the implementation in July of the Foreign Account Tax Compliance Act (FATCA).
Enacted in 2010, FATCA requires foreign financial institutions to share information on US citizens with authorities in Washington. In the event of national law preventing such sharing being allowed, the US government has signed a number of these IGAs ahead of the implementation date for the legislation.
Data sharing will be reciprocal, meaning data on Australian citizens with US accounts will also be available. It may likely impact companies exporting from the US to Australia, and from Australia to the US.
The agreement has been broadly welcomed as it is felt it will reduce the burden on Australian business and also minimise costs.
Australian Treasurer Joe Hockey said: "The conclusion of this treaty-status IGA will help Australian financial institutions comply with FATCA. It reduces the overall burden on Australian business, minimises costs by simplifying due diligence requirements and broadens arrangements between the Australian Tax Office and the US Internal Revenue Service."
In addition, the IGA will "improve existing tax information-sharing arrangements between Australia and the US, for the purpose of preventing tax evasion", he said, adding: "This will help to enhance the integrity of both countries' tax systems."
US officials have been busy signing IGAs with a number of governments ahead of July 1st deadline for FATCA implementation. Recently it was announced the US had struck a deal with the Hong Kong authorities over the legislation, adding to its previously-agreed IGA with Japan.
The US has signed FATCA agreements with roughly two dozen countries, with more are on the way. Treasury secretary Jacob Lew said: “There is significant momentum to implement FATCA across the globe, and we will continue to work closely with our international partners to combat these illicit activities and raise global tax standards.”