The Exchange of Information Agreement with Australia: How it Affects You
On June 30, 2021, the United States and Australia entered into an agreement to exchange tax information between the two countries. This agreement aims to enhance tax transparency and combat tax evasion, and it will affect taxpayers who have financial interests in either country.
Here`s what you need to know about the Exchange of Information Agreement with Australia.
What is the Exchange of Information Agreement?
The Exchange of Information Agreement is a treaty between the United States and Australia that allows for the exchange of financial account information between the two countries` tax authorities. The agreement follows the guidelines of the OECD (Organization for Economic Co-operation and Development) Standard for Automatic Exchange of Financial Account Information in Tax Matters.
This means that the IRS and the Australian Taxation Office (ATO) will automatically exchange certain financial information about their taxpayers, including bank account balances, interest income, dividends, and other types of income.
Why is this important?
The Exchange of Information Agreement is important because it is part of a global effort to combat tax evasion and promote tax transparency. By sharing financial information, the IRS and the ATO can identify taxpayers who have not reported all of their income or who have hidden assets in offshore accounts.
The agreement also helps to level the playing field for honest taxpayers who pay their fair share of taxes. When some taxpayers evade taxes, it places a greater burden on those who comply with the law.
Who is affected by the Exchange of Information Agreement?
If you have financial interests in Australia or the United States, you may be affected by the Exchange of Information Agreement. This includes:
– U.S. citizens who have bank accounts or other financial accounts in Australia
– Australian citizens who have bank accounts or other financial accounts in the United States
– U.S. residents who are Australian citizens or who have dual citizenship with Australia
– Australian residents who are U.S. citizens or who have dual citizenship with the United States
– Businesses or corporations that operate in both countries
What should you do?
If you are affected by the Exchange of Information Agreement, it`s important to ensure that you are compliant with tax laws in both countries. This includes reporting all of your income and assets, as well as paying any taxes owed.
If you have unreported income or assets in either country, you may want to consider participating in a voluntary disclosure program. These programs allow taxpayers to come forward voluntarily and disclose their unreported income or assets. In exchange, they may be eligible for reduced penalties or other benefits.
Conclusion
The Exchange of Information Agreement between the United States and Australia is an important step in promoting tax transparency and combatting tax evasion. Taxpayers who have financial interests in either country should ensure that they are compliant with tax laws and consider participating in a voluntary disclosure program if necessary. If you have any questions about how the agreement affects you, consult with a tax professional.