The Parliament today passed the Turnbull Government’s latest set of strong measures to combat tax evasion.
The Tax Laws Amendment (Implementation of the Common Reporting Standard) Bill 2015 is a key part of the international fight against tax avoidance; and its passage through the Parliament demonstrates once again that the Turnbull Government is committed to ensuring people pay their fair share of tax in Australia.
The Common Reporting Standard is an international framework developed by the Organisation for Economic Co-operation and Development (OECD), working with non-OECD G20 countries, to tackle and deter cross-border tax evasion.
The Standard will assist the Australian Tax Office (ATO) to crackdown on taxpayers hiding funds and investments offshore in order to avoid paying their fair share of tax in Australia.
By participating in this international effort, we are enabling the ATO to gather information on Australians who may choose to dishonestly hide foreign income offshore.
Globalisation and other technological advances have made it easier for individuals to hold investments in offshore financial institutions, which increases the opportunity for tax evasion.
The Standard will help ensure all taxpayers pay their fair share of tax by providing tax authorities with information on individuals with offshore accounts, regardless of where their financial accounts are located.
The Standard was endorsed by G20 Leaders during Australia's G20 Presidency and Leaders committed to commence the confidential exchange of financial account information under the standard between revenue authorities as part of the fight against tax evasion.
The Standard ensures that the ATO will receive information annually on Australians' offshore accounts, such as investment income and balances, and use this information to check if the offshore income has been declared in Australian tax returns.
In exchange, certain financial institutions in Australia will collect information on foreign residents' accounts and report it to the ATO. It will then be reported to the foreign residents' tax authorities.
The Government will implement the Standard from 1 July 2017. Initial exchange of information with foreign tax authorities will take place in 2018.
Over 95 jurisdictions have committed to implement the Standard, including Luxembourg, Switzerland, the British Virgin Islands, the Cayman Islands, the Isle of Man, Guernsey and Jersey.
In June, Australia signed the multilateral competent authority agreement for the Standard, which enables the information to be exchanged between jurisdictions' tax authorities.
The Turnbull Government’s suite of strong measures against tax avoidance stand in stark contrast to Labor’s rushed and unworkable proposals.
The Government is cracking down on tax avoidance through:
- Strong new Multinational Anti-Avoidance Laws to ensure multinationals that make sales in Australia do not avoid tax by booking revenue offshore (laws Labor voted against in the Parliament);
- G20/OECD Base Erosion and Profit Shifting recommendations on country-by country reporting, treaty abuse rules, and harmful tax practices and exchange of rulings;
- New tax requirements on foreign investment applications to ensure multinational companies investing in Australia pay tax here on what they earn, and
- Introduction of legislation to remove the competitive tax advantage for overseas companies by applying the GST to digital product and other services sold overseas.