Customers of Australian financial institutions are increasingly being asked to confirm their tax residency status. 

Australian and foreign residents should be aware that many Australian financial institutions will increasingly be asking them to confirm their tax residency status when gathering information for financial products. Why? It is part of the implementation requirement for a Common Reporting Standard that is designed to help countries identify and combat tax evasion. 

What is the Common Reporting Standard? 

The Organisation for Economic Cooperation and Development (OECD) has developed the Common Reporting Standard (CRS) to help tax jurisdictions to combat tax evasion by foreign residents. 

It was created as a global standard for the automatic exchange of account information held by financial institutions in different countries and stemmed from the US Foreign Account Tax Compliance Act (FACTCA), but it is broader in terms of reportable account holders and financial institutions. 

Which countries are participating in CRS? 

There are approximately 100 countries that have committed to reporting under the CRS, including the United States of America, United Kingdom, Canada, Germany, Japan, New Zealand, Switzerland, and China. 

There are also countries participating from more exotic locations previously known as tax havens, such as the British Virgin Islands, the Cayman Islands, the Isle of Man, Guernsey, and Jersey. 

Who is likely to ask for tax status?

Australian financial institutions across a number of services are likely to ask for information about tax status, including:

• Banks, building societies, and credit unions
• Life insurance companies that offer products with an investment component
• Investment companies that offer private equity funds, exchange-traded funds, managed funds and brokers that hold financial assets for the account of others. 

What information will they be likely or required to share? 

Reported information from financial institutions may vary depending on the nature of their holding, but in most cases, it will include the type of account, name, address, date, and place of birth of the account holder. 

Other information that may be shared could include a breakdown of investment income such as dividends, interest, and income from certain insurance contracts, account balances, and sales proceeds from financial assets. 

ATO’s data matching program designed to prevent tax evasion

The Australian Tax Office participates in the global information exchange effort to ensure it can keep track of Australians who may have foreign income. 

The ATO will pass on relevant information about foreign residents’ accounts from Australian financial institutions on a reciprocal basis. The ATO receives information from offshore tax authorities and financial institutions, which it can then use to verify that the income has been declared in Australian tax returns. 

Know your tax obligations

If you have offshore investments, either as an Australian resident or as a non-resident, then it’s important to understand the implications for your tax obligations and where you’re likely to be taxed. 

For more information about how tax authority data matching and sharing impacts you, contact us on 02 9957 4033 or email our team. 

Last updated January 2017. This factsheet is provided for information purposes only and is correct at the time of publishing. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.