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PROJECT DO IT = Tax amnesty by ATO for SA Trust not disclosed


Hugo2

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IT’S a matter of time SA Trust beneficiaries living in australia will be harshly treated AS TAX CHEATs WARNS the ATO.

“Project do it” may be your come out of jail card

DO IT before 19/12/2014 = formally emigrate now and wrap up your sa trust soonest

The ATO (the Australian Taxation Office) recently announced and published significant PROJECT DO IT information on the tax amnesty on the foreign asset amnesty options available.

Albeit that it is aimed at taxpayers with funds in tax havens, they acknowledge tax treaty country immigrants to Australia may also benefit i.e. South African emigrants with SA trusts / inherited funds not previously disclosed can now follow the “DO IT” process.

Just DO IT before 19 December 2014. The project is part of the global crackdown now that most jurisdictions will be automatically be exchanging tax information amongst each other.

The Project DO IT initiative covers amounts not reported or incorrectly reported in tax returns, including:

  • foreign income or a transaction with an offshore structure which includes inward foreign loans deemed as foreign dividend income;
  • deductions relating to foreign income that have been claimed incorrectly;
  • capital gains in respect of foreign assets owned, inherited or held in an offshore trust;
  • capital gains in respect of Australian assets transferred offshore;
  • Any income from or within an offshore entity (company or a trust) which could be or should have been taxable in your hands i.e. trust income, dividends not qualifying as franked dividends and offshore trusts that should have been reported as ATO tax residents.

FATCA and the OECD platform for member stated will ease information sharing between countries. In the past the sharing of information and resources was cumbersome and limited to case by case enquiry. Automatic exchange of tax information means that Australians who have offshore assets will have their foreign asset details reported to the ATO annually. SA expats living in Australia should take note of the most recent Krok case where SARS and the ATO showed the muscle in a joint clampdown removing cross border challenges overnight. The new best brother relationship is not to be ignored.

Project DO IT, a new tax office disclosure initiative to reach offshore assets held by Australian tax residents (be it tax immigrants or diaspora and returning expats) either within offshore companies, offshore trusts, undisclosed foreign inheritances and bank accounts in offshore jurisdictions, be it treaty countries or tax havens.

The Tax Institute members and attendees report that Mr Jordan said:

“Now is the time for individuals with offshore income to get their affairs in order and avoid steep penalties and the risk of criminal prosecution for tax avoidance. If you’ve got international tax liabilities, act now and come forward and we’ll bring you back into the system with a heavily reduced penalty. If you don’t declare your interests, you’ll be caught and penalised.”

Project DO IT time bombs on 19 December 2014, and in return the ATO undertake to:

· Only assess the last four years of income whereas previous voluntary disclosure and amnesty programs went as far back as 10 or more tax years in the past

· Penalties (often as high as 90%) will be capped at 10 per cent.

o Where the foreign income per year is less than Au$ 20 000 the penalty will be waived

· They will avoid criminal investigations on basis taxpayer disclosures;

o Provide settlement deeds for further certainty.

Eligible Taxpayers

Eligible taxpayers include all taxpayers including South Africans having immigrated to Australia unless the ATO:

  • is already auditing the taxpayer in relation to the omitted offshore income or capital gains or over-claimed deductions;
  • the taxpayer has been involved in promoting or marketing tax evasion schemes (with some possible exceptions);
  • the taxpayer is already under criminal investigation concerning tax-related criminal offences or the foreign assets or income were derived from serious criminal offences unrelated to tax; or
  • the taxpayer has not complied with specific obligations from a previous offshore voluntary disclosure initiative that they were involved in.

PROJECT DO IT BENEFITS

Over and above the benefits listed above, the ATO will not conduct criminal investigations for fraud or evasion or voluntarily refer a taxpayer to other law enforcement agencies.

Furthermore the ATO will give assurances of the tax effects of winding up any offshore structures or transferring offshore assets to Australian entities.

This is where formal emigration options and the most recent SA Reserve Bank easing of exchange control will be appreciated. You can now emigrate your small business from South Africa and correctly structure your Australian affairs, once you have formally emigrated.

Before you jump the gun, consider the following:

Understand that SARS intends to cooperate with the ATO, yet SARS will now be able to collect their fair share of taxes before you can clean up your ATO affairs.

  • Speak to a reliable and experience SA based cross border tax and exchange control adviser on the best route to go. Facing 26.6% SA exit tax and a 10% ATO penalty may not be what you expected!

o Obtaining or filing for SA VDP (amnesty in SA) simultaneously may be the answer.

  • If the ATO detects you before you make a disclosure, you disqualified from the benefits of Project DO IT;
  • Be honest!
    • Providing false or misleading information may allow the Commissioner in Australia to denying you the amnesty; and
    • Disputing any tax, penalties or interest imposed following the disclosure and your may forfeit the assurances given by the ATO;
    • The ATO does not grant amnesty from independent investigation by other law enforcement agencies or prosecution by the Commonwealth Director of Public Prosecutions; and
    • The Anti-Money Laundering and Counter Terrorism Financing Act 2006 obligation where offshore assets are being transferred or repatriated under this initiative is not waived

How to apply:

The ATO has published the a “disclosure statement 2014” form, found on the ATO website which must be completed and be and submitted together with other relevant information to the ATO before 19 December 2014.

Yet, before you proceed with this application, ensure your SA Trust is fully tax and Master’s office complaint in South Africa. In short, ensure you are “legal” on both sides by commencing with a trust audit and due diligence in South Africa.

Have any questions? Contact Hugo

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Good solid information! Thanks Hugo for sharing this.

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  • 7 months later...

Just a reminder that the due date is 19 December 2014.

A simple example of who can benefit is a client (from the UK) whom did not disclose property they are letting in the UK since they were under the impression that as long as they do not bring the money to Australia, no tax should apply - their accountant apparently was not aware of the property. Anyway with the four year limitation (note it revers to the date of the notice of assessments) they are almost scoring (although the interest is a sum) but then again they should be able to deduct the interest this year.

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Hi Gerhard, how does this relate to being a beneficiary/trustee of a family trust in SA? And if you are not receiving income from this trust?

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Tiermelk, it would depend on a number of factors, but in theory I think that if you as a beneficiary of a discretionary trust was never entitled to any distributions then there is probably nothing to declare. However, if the trust received say interest income which was distributed then the beneficiary received interest income (most of the time anyway). In South Africa there is interest threshold (certain amount of interest not taxed), in Australia no such threshold.

So it would depend what distributions were received from the trust and whether taxable in Australia. If the latter I can see no reason why DO IT will not apply, after all it stands for Declare Offshore Income Today!

I cannot see that being a trustee of a trust would make a difference unless also a beneficiary but as far as I recall that is then where the whole argument starts whether there is actually a trust (if say one beneficiary and one trustee the same person).

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