Australia: Disclosing your offshore income – Project Do It – today!

The Australian Taxation Office (ATO) 2014 amnesty initiative to disclose your offshore income and assets is winding up. So what if you didn’t apply for amnesty under Project Do It? Is it too late for you?

Project Do It

On 27 March 2014, the ATO announced the Project Do It initiative as a one-off opportunity to allow eligible tax payers to come forward and voluntarily disclose unreported foreign income and assets pursuant to certain undertakings by the ATO.

The ATO urged everyone to declare any undisclosed offshore income or assets ahead of a global crackdown on people using international tax havens.In particular, the ATO emphasised that it would be using powers offered under agreements between Australia and other countries (such as Switzerland) for exchange of information about hidden or undisclosed offshore income and assets.

The Project Do It initiative offered eligible taxpayers the opportunity to take advantage of certain undertakings by the ATO if the taxpayer made a relevant disclosure, including:

• the ATO would only seek information relating to assessing tax for the last four income years;
• the ATO would not form an opinion of fraud and evasion;
• if the additional income disclosed was more than $20,000.00 in an income year, the taxpayer would only be liable to a tax shortfall penalty of 10% (rather than a penalty as high as 90% in some circumstances) on the tax owing to the ATO;
• the ATO would not investigate the taxpayer’s disclosure for the purposes of prosecuting the taxpayer for a criminal offence; and
• the ATO would not refer the taxpayer for criminal investigation by another law enforcement agency.

To be eligible for the Project Do It initiative, the ATO required taxpayers to make their disclosure or at least lodge an expression of interest by 19 December 2014. Expressions of interest lodged by 19 December 2014 allowed taxpayers more time in the 2015 calendar year to complete their disclosure under the Project Do It initiative.

Many disclosures under the Project Do It initiative have been lodged and concluded by way of settlement deed with the ATO to allow those people an opportunity to wind up any offshore structures while taking advantage of any losses made during the disclosure period.

So what can you do now?

What if you didn’t make a disclosure in time to be part of the Project Do It initiative? The good news is you can still put your tax affairs in order by making a voluntary disclosure to the ATO outside of the Project Do It initiative.

So how do you make an effective voluntary disclosure? A voluntary disclosure requires taxpayers to make a disclosure to the ATO without being prompted, persuaded or compelled by the ATO. The amount of any reduction in penalty amounts and interest charges depends on when you make the disclosure to the ATO. It is important that you make the disclosure as soon as possible.

While certain assets and sources of income are easy to identify such as bank accounts and property, Australian tax law is complex in its treatment of offshore trust and company structures. For this reason, it is strongly recommended you seek tax and legal advice before making a voluntary disclosure.