Small business owners have just days left to declare assets in offshore tax havens as part of a tax amnesty, with the Australian Tax Office saying it will crack down on business owners who continue to hide assets.
The Project DO IT: Disclose Offshore Income Today amnesty, which was originally announced at the end of March, is open until December 19.
The tax imposed on funds disclosed through Project DO IT will be limited to offshore income from assets in the past four years, penalties will be capped at 10% and low level disclosures will attract minimum penalties.
The amnesty also covers amounts incorrectly reported in tax returns. This includes interest from an overseas bank account, incorrectly claimed deductions from foreign income, capital gains on foreign assets and income from an offshore entity that is taxable in your hands.
According to figures from the ATO, 2500 taxpayers have already come forward under the amnesty. This includes 1750 disclosures, totalling more than $240 million in additional income and $1.7 billion in offshore assets. An additional 800 taxpayers have come forward but have not yet made a formal disclosure.
The ATO says common jurisdictions for offshore assets include Switzerland, Great Britain, Israel, Singapore and Hong Kong.
In a statement issued to SmartCompany, ATO Deputy Commissioner Michael Cranston said the amnesty is an opportunity for people who have engaged in previously unreported offshore financial activities to get their tax affairs in order. But he also warns the ATO is “closing in on tax evaders”.
“Increased international cooperation means the net is closing in on tax evaders around the world,” says Cranston.
“In recent years, information sharing between countries has increased significantly. Banking data is being exchanged routinely and automatically and the G20 is promoting global tax transparency.”
“Even countries previously thought of as tax havens, such as Switzerland and the Cayman Islands, are working with tax authorities around the world to increase financial transparency.”
Mark Chapman, head of tax with lobby group Taxpayers Australia told SmartCompany it will be difficult to know how successful the amnesty has been until after it finishes.
“It’s good for the taxpayers who go the amnesty route because taxpayers can have certainty without large penalties. It will be interesting to see how many people take up the offer,” Chapman says.
But Chapman believes amnesties should be “used sparingly”.
“If people come to expect amnesties it can actually encourage noncompliance, as people will expect to have an escape route,” he says.
“For a successful amnesty, the ATO has to show carrots and a big tax stick. So we’ll be expecting some hard compliance action. If we don’t see that, the amnesty will be a missed opportunity.”
Small business owners considering making a disclosure under Project DO IT can do so by phoning the tax office on 1300 132 346 or by visiting ato.gov.au/projectdoit.