Taxation Law - Have You Received A Letter From The Australian Tax Office

Have you received a letter like this recently from the Australian Tax Office (ATO)? -

"Dear [          ]

The Australian Taxation office (Tax Office) is increasing its focus on Australian residents who may have undisclosed offshore income or over claimed deductions involving international transactions.

Based on information from the Australian Taxation Reports and Analysis Centre (AUSTRAC) we understand you have made funds transfers to or from a tax haven.

While there are legitimate reasons for Australian residents to transact with tax havens there are situations where transactions have been part of an arrangement to avoid tax.

As a person who has transacted with a tax haven it is possible this will affect you.

Under Australian tax law, residents for tax purposes generally need to declare and pay Australian tax on all income inside or outside of Australia.

If you have done this and have nothing further to disclose to the Tax office you can disregard this letter.

If you have any doubts about your potential Australian tax liability you should seek independent professional advice and/or contact the Tax Office.  This is an opportunity to get your tax affairs in order if required and put this issue behind you.

The Tax Office is encouraging all those with unpaid tax to pay what they owe through voluntary disclosure. If you make a voluntary disclosure you may be entitled to a reduced shortfall penalty.  You can ask the Tax Office to take into account your personal circumstances in relation to how much shortfall penalty and interest is ultimately payable.

We have also enclosed a Tax office fact sheet outlining how to make a voluntary disclosure and potentially avoid a significant shortfall penalty in the future.  More information can be found on the Tax office website www.ato.gov.au or by calling 1300 132 346.

Yours sincerely

Deputy Commissioner of Taxation"

Ignore it at your peril.  We recommend that you read our other articles outlining the approach being taken by the ATO involving the use of tax havens by Australian resident taxpayers.  Generally a non-resident is only liable for Australian tax on Australian income sources.  For individuals there is a real difference between being a resident for Australian tax purposes as against domicile, nationality and citizenship.  Many persons with overseas interests may have acquired money and property overseas before settling in Australia and may not regard this as subject to Australian income tax.  Australian residents are taxed on all of their foreign-sourced income irrespective of how it was derived.  Remember, for an individual to be liable to pay Australian income tax they must be an Australian resident which is really a question of fact to be determined according to the circumstances. What is important about the above letter is the opportunity to make a voluntary disclosure which may be lost if it is either disregarded or neglected.  For competent tax advice and representation call LAC Lawyers for assistance.