The ATO program 'Project DO IT', encourages taxpayers to report undisclosed income from international financial activities by capping penalties on previously undisclosed income to 10%. Where the total tax on undisclosed income is less than $20,000 in a particular year, the penalties are reduced to nil.
The Australian Taxation Office (ATO) project to encourage taxpayers to disclose international financial activities does so by capping penalties on previously undisclosed income to 10%. Where the total tax on undisclosed income is less than $20,000 in a particular year, the penalties are reduced to nil.
Australian tax residents are subject to tax on their worldwide income. There is a declaration on the tax return about holding more than $50,000 of assets overseas and a declaration that all information provided is true and correct. If a taxpayer knowingly lodges a return that omits foreign income, then severe penalties may apply in relation to that non disclosure if they are detected under audit.
The Australian Government has extensive tax treaties with more than 100 countries and information exchange agreements with other countries. Further, AUSTRAC reports details of international bank transactions of more than $10,000 and all Australian banks are required to report information to the Government. This provides the ATO with powerful tools to crack down on offshore tax evasion.
Under Project DO IT, if voluntary disclosure occurs before the program finishes on 19 December 2014, then the ATO has advised they will only review tax affairs where the amendment period for a particular year has not yet expired (generally 4 years from lodgement of return). The ATO has confirmed that it will not form an opinion about fraud or evasion (which would otherwise allow them to go back and review indefinitely) and will not refer taxpayers for criminal investigation.
If voluntary disclosure occurs and reveals a tax shortfall for a year, the Income Tax must be paid and 'Shortfall Interest Charge' will apply (current quarter's rate is 5.69%) on the overdue tax. However, the promise of 10% or no penalties may be attractive to many taxpayers for peace of mind.
If you would like more information about Project DO IT or would like to speak confidentially with our tax partner, Jamie Towers, about how this may apply to your tax affairs, please contact Jamie on 07 3218 3900 or at Jamie.firstname.lastname@example.org