Tax authorities around the world are warning expats to own up to offshore tax avoidance as a new international data sharing network is switched on to full capacity.
The Common Reporting Standard links tax services in more than 100 countries.
The way the network swaps data is simple. Each country sends every other network member personal and financial details of bank accounts and investments their nationals hold, and in return, receives the same data about their own nationals offshore financial activities from other network members.
The Australian Taxation Office (ATO) is the latest tax authority to warn expats and suspected tax dodgers that their money is now tracked across borders and cannot be hidden offshore any longer.
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“This year, the ATO has received records relating to more than 1.6 million offshore accounts holding over AUS$100 billion and is now using data-matching and sophisticated analytics to identify foreign income that has not been reported,” Assistant Commissioner Karen Foat said.
The ATO has shared data on financial account information of foreign tax residents with more than 65 countries. This information includes personal details of account holders, balances, interest and dividend payments, proceeds from the sale of assets, and other income.
“Australians that deliberately move cash overseas to try to hide from paying the tax should be concerned. Hiding your assets and income offshore is pointless. Tax havens are becoming a less effective model as international agreements improve transparency. You can no longer hide money behind borders,” said Foat.
What is the Common Reporting Standard?
The ATO also understands some taxpayers might not understand how their offshore income is taxed and is urging them to contact a professional adviser.
“If you’re an Australian resident for tax purposes, you are taxed on your worldwide income, so you must declare all of your foreign income no matter how small the amount may be. This may include income from offshore investments, employment, pensions, business and consulting, or capital gains on overseas assets,” Foat said.
The CRS is an international reporting standard for swapping personal data between countries automatically. More than 150 countries have signed up to the treaty.