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AJML Accountants Update – August 2020

Residency for tax purpose – Part 14

CRS legislation

The CRS legislation received Royal Assent on 18 March 2016 and came into effect on 1 July 2017. The first exchange of information will occur in 2018.

Who does CRS apply to

The CRS applies to foreign tax residents and to financial accounts held by entities (such as companies, trusts, partnerships and associations). If an individual controls or beneficially owns an entity or has a specific connection to the entity then they may be identified and reported in connection with the entity’s financial accounts.

How does it affect financial institutions

Financial institutions such as banks and other deposit taking institutions, custodial institutions, investment entities, and specified insurance companies are required to report under the CRS.

What do you need to do

You should ensure accurately disclose the offshore assets and foreign source income. If you have foreign source income that you have not disclosed, you will be liable to penalties and interest charges.

What this means to you

Australia is one of many countries that has committed to new global standards on the automatic exchange of financial account information. This information is required by law to be collected by financial institutions around the world for reporting to tax authorities. It is then automatically exchanged each year. The exchange of this information helps make sure everyone pays the right amount of tax.

In September 2018 the government will receive the first round of data from foreign jurisdictions. The data will contain information on financial accounts held by Australian tax residents and entities overseas. Financial accounts that will be reported to the government include:

  • depository accounts
  • custodial accounts
  • debt or equity accounts
  • cash value insurance and annuity contract accounts.

The data will contain details about each financial account including:

  • the account balance
  • interest payments
  • dividend payments
  • proceeds from the sale of assets
  • other income.

Australian official development assistance

Australian official development assistance (ODA) is assistance delivered through the Australian Government’s overseas aid program that is administered by the Department of Foreign Affairs and Trade and/or the Australian Agency for International Development (AusAID).

AusAID also contracts aid work to Australian and international entities. As a result, individuals involved in the delivery of Australian ODA can include both Australian Public Service (APS) employees and non-APS employees.

For the purposes of the exemption, your foreign service must be attributable to undertaking employment with AusAID itself or an entity contracted by AusAID to assist in the delivery of Australian ODA.