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Australian tax initiative
Geraint Davies from Montford International warns potential emigrants about the dangers of Fact Sheets and explains Australia’s new ‘tax initiative’
If the following words deliver but two messages then I will be happy. The first is to be wary of the sale of Fact Sheets. These can be very helpful but can also be dangerous. The second is to pay heed of the taxman as he offers many options to migrants. Fact sheets, unless accompanied by quality, qualified advice, are very dangerous. A national paper, for example, recently published a list of facts about moving to Australia. However, whilst some of the facts were correct, others were dangerously incorrect for some.
Let's look at the Australian initiative/amnesty. When the UK offshore tax amnesty ended on 22nd June this year, Australia swiftly followed suit. It decided to have its own form of offshore tax amnesty choosing to refer to it as an 'initiative'. Tax Commissioner Michael D'Ascenzo announced on the 18th July that there would be an initiative "encouraging" Australian taxpayers to make disclosures of unaccounted income from foreign sources.
I think we can all see where this is heading – to the sharing of information. Checking your financial position before you go to Australia is clearly no longer a luxury but a way of life. If you are going from one country that's had an amnesty to one that is having 'an initiative' and the countries are not at war, then, maybe, just maybe, they could share information. Tax is not meant to be a long intricate game for the taxman. And before you think this is for the big boys – tax is tax and if you are entitled to a refund or to make good a liability, then don't ignore it. It could be that you qualify for a surprise cash booster.
Since 22nd June, the UK's tax collectors have set in progress a full-scale investigation of people with offshore accounts. It appears they know full well who has not paid tax due in the UK, and there could soon be a knock on the door for those resident in Australia, let alone UK. Taxpayers who failed to register for the UK tax amnesty before the deadline could face penalties of up to 100 per cent or even face prision.
With Australia following this initiative you can expect that the penalties of not disclosing income from offshore financial products will be similar. On the day Australia announced its amnesty, it jailed someone for a 15-month stretch for dodging more than AUS$300,000 in tax by hiding the money offshore. He therefore had the dubious honour of becoming the first person to succumb to these offshore investigations by the Australian Tax Office. And please remember the UK is offshore to Australia. The people that should be particularly concerned by this announcement are migrants that have moved to Australia in recent years and, therefore, by a simple process of logic, so should those of you hoping to do likewise.
By definition the Australian Tax Office includes the holding of any offshore accounts held in a financial institution or branch outside Australia in its taxation grasp. The warning is out for the following: Debit and credit card accounts; securities such as company shares; managed investments; derivatives including traded foreign exchange; superannuation; pensions not in payment; pensions in payment; life insurance and or investment products; and any other tradeable financial product such as shares. Most migrants who have left their own shores for Australia have left financial products behind, be it only a simple bank account. This being the case it is imperative that soon-to-be migrants seek financial advice as to what they can and cannot leave behind in their former country, without delay.
The offshore voluntary disclosure initiative does not mean that all foreign products should be surrendered. It doesn't mean that all funds should be transferred to Australia at the earliest possible moment. Nobody is saying because most products are automatically going to be assessed that a tax liability is bound to follow – it could be that you are entitled to a credit even. But you must check. Please note that although migrants might have products that fall under the Foreign Investment Fund (FIF) tax regime they may not exceed the threshold and if they then do some careful planning this will remove the liability. Similar rules apply to pension transfers – not all should be transferred, but some possibly should.
Migrants should also check their visa status as that may exempt them from tax on foreign sourced income. From 1st July 2006, temporary visa holders who are resident in Australia for tax purposes may find their foreign income not taxed in Australia. There are exceptions, such as income earned from employment performed in Australia, while pensions in payment will be treated differently. There are also options with income from property rental. Therefore, if a migrant believes that the easiest way around the offshore tax amnesty is to surrender or just ignore the rules and hope they go away, or even to transfer a financial product immediately, they really could find themselves seriously far worse off financially than they should be.
The key to your success is to seek sound financial advice in order to ascertain what your financial position is. The offshore tax amnesty does not necessarily mean that all the doors are closed for offshore financial products for migrants. In stark contrast it may even open a few doors for people who did not realise the opportunities were even there.
For further information:
Montfort International
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