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The Commissioner of Taxation has announced a new opportunity for people with undeclared income from offshore activities or accounts to come clean.

 

The Commissioner announced the offer for those who have not declared all of their offshore income to make a voluntary disclosure and receive concessional treatment on penalties.

 

Importantly, this offer is not open to anyone currently under review by the ATO or who has received an 'intention to audit' letter. So, act quickly to get in first.

 

The Commissioner has warned that the "net is closing on tax havens" and has highlighted the ATO's expanding ability to trace the flow of money around the world and obtain information from overseas revenue agencies and financial institutions.

 

The Commissioner has acknowledged that some taxpayers with undisclosed foreign income are keen to sort out their affairs with the ATO but are concerned about the consequences, particularly the potential for criminal investigation. As a result, a key feature of the new arrangement is that taxpayers can approach the ATO anonymously for "an indication of whether they would initiate an investigation to determine whether there is a potential breach of the criminal law."

 

The new offer is open until 30 June 2010. Taxpayers with undisclosed income of less than $20,000 in a tax year will not have to pay a shortfall penalty. Taxpayers with undisclosed income of more than $20,000 in a tax year will be subject to shortfall penalties of 10 per cent (an increase of 5% on the previous arrangement).

 

The general interest charge (GIC) will be reduced to nil for the tax years up to and including 2002 and will be reduced to the base rate for the 2003 and 2004 tax years. Normal shortfall interest charges will apply for 2005 and later years.

 

Taxpayers with any of the following should consider taking advantage of the Commissioner's offer:

The Commissioner has warned that this will be the last chance for those with undeclared foreign income to come clean before he adopts a hard line approach. Taxpayers should assume that the Commissioner has extensive access to information on overseas dealings in light of the large number of exchange of information deals he has secured in the past 12 months.

 

Those who are concerned about exposure to criminal prosecution should seriously consider approaching the ATO anonymously for an indication of whether voluntary disclosure would lead to a criminal investigation.

 

One of the practical issues is being able to produce sufficient material to satisfy the ATO as to the original source of the funds generating the income. On the assumption that the ATO will take the view that there has been fraud or evasion, there will be no limit on how many years it will go back and amend or raise assessments.

 

The Tax team at Hall & Wilcox has extensive experience, including Project Wickenby matters, in guiding clients through the voluntary disclosure process and dealing with the ATO to ensure the best possible result.

 

Further information and Q&A material in relation to the offshore voluntary disclosure process is available on the ATO website or at Offshore voluntary disclosure.