ATO issues warning to taxpayers over overseas money transfers
The Australian Taxation Office (ATO) has raised concerns over the increasing scrutiny of overseas money transfers into the country, calling for taxpayers to seek proper tax advice before making a transfer.
According to Melbourne-based tax specialist, HLB Mann Judd, the ATO has "drawn a line in the sand" with regards to overseas money transfers into Australia and taxpayers need to be careful or risk raising suspicions. Josh Chye, the head of tax at HLB Mann Judd, warns that the ATO is increasingly scrutinizing such transfers and that prudent planning is essential.
"The ATO has made it clear that it is aware that some people are migrating funds here to mask it as something it's not, in an attempt to avoid paying tax," says Chye. "It's timely as Australia continues to attract strong levels of investment, particularly in the real estate sector, both residential and within property development."
The ATO's advanced data resources mean that another amnesty for offenders, similar to the Project DO IT in 2014, is unlikely. Project DO IT was a one-time opportunity for individuals to disclose omitted offshore income, capital gains, and over-claimed deductions with reduced penalties. The ATO has increased its level of resourcing and has entered into tax information exchange treaties with other jurisdictions, granting it significant information-gathering powers.
Chye advises individuals seeking to transfer funds into Australia to ensure that their tax structuring is appropriate well before they physically transfer the funds. He warns that individuals claiming transferred funds in amounts between $2 million and $50 million for a loan from an unrelated party would raise an alert at the tax office. "The ATO's powers are far-reaching and intended to also put advisers on notice and encourage them to dig deeper with clients and their financial affairs, otherwise advisers could be unwillingly supporting mischaracterized amounts coming in, which carries the risk of prosecution," Chye adds.
According to Chye, Australia's unique tax laws mean that early investment in tax advice will pay off. He recommends that if taxpayers are concerned about their level of compliance, they should get a review conducted to determine their current obligations and create a plan for the future. "A voluntary disclosure can mitigate against substantial penalties, time, cost and angst of a protracted ATO review or audit," says Chye.
In conclusion, the ATO is increasing its efforts to monitor overseas money transfers into Australia, and taxpayers are advised to seek proper tax advice and plan carefully before making any transfers to avoid raising suspicions and risking prosecution. With strong levels of investment in the real estate sector, the ATO's message is clear: be prepared and comply with the law.
