Australian CRS/FATCA Update
Jacqueline Bennett
Partner International Tax & Transaction Services, Asia Pacific Financial Services at EY
As planning commences for this year’s Foreign Account Tax Compliance Act (#FATCA) and Common Reporting Standard (#CRS) compliance and reporting season it is important to reflect on recent developments.
ATO self-review guide and toolkit – the importance of self-review
In July last year, the Australian Taxation Office (ATO) issued a self-review guide and toolkit to assist Australian Reporting Financial Institutions (RFIs) with their FATCA and CRS obligations. The guide emphasises the expectations for a well-designed governance and compliance framework.
What next?
If not already completed, Australian RFIs should review their CRS/FATCA frameworks to ensure there are no gaps compared to the ATO’s expectations.
With the ATO’s focus on compliance and stronger enforcement, there is a small window of opportunity for RFIs to self-assess their compliance against the toolkit, and to engage early with the ATO where compliance gaps are identified.
Now is the best time to self-review your process and be one step ahead before the reporting deadlines. This can be an ongoing process for RFIs to keep the framework in check and updated.
Other important considerations for reporting
Strict enforcement of CRS/FATCA deadlines
The reporting deadline in Australia for FATCA and CRS is 31 July 2023 (for reporting year 2022).
The ATO has publicly stated they will enforce this deadline going forward. Extensions will be granted in only very limited circumstances. Automatic penalties may also be levied for non-compliance.
RFIs should consider bringing forward their reporting cycles to ensure the deadlines are met.
Increased focus on data quality, control and data analytics
ATO compliance is shifting towards assuring data quality. The ATO has invested heavily in data analytics and are now able to quickly review and identify data issues in CRS reports. Typically, these data quality issues will highlight deficiencies in upstream due diligence processes and controls.
The ATO’s self-review guide and toolkit sets out minimum standards for data testing. RFIs should consider embedding data analytics and data testing into their compliance and reporting frameworks.
#EY’s Data Analytics Tool helps to keep both upstream and downstream checks assuring the data quality and control of your FATCA/CRS processes and reporting output.
The importance of the TIN field
The tax identification number (TIN) is the key field used by tax authorities to match CRS data with local taxpayers. The ATO monitors for noticeably incorrect TIN formats and recommends specific tests as part of the CRS/FATCA reporting process.
RFIs should take reasonable measures to check the validity and reasonableness of TINs provided at the account opening stage and embed controls into the annual reporting process.
EY’s TIN validation tools can automate this control step by comparing TIN formats to global publicly available guidance.
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New FATCA guidance for US TIN reporting
The US Internal Revenue Service (IRS) has provided an interim measure where Foreign Financial Institutions (FFIs) will not be treated as non-compliant if they fail to report a US TIN with respect to a pre-existing account.
RFIs should review the ongoing due diligence and solicitation requirements required for this measure to apply.
Updated FATCA TIN Codes for 2022, 2023 and 2024
In January 2023, the IRS published a list of TIN codes which are designed to better understand why RFIs may not have been able to obtain a US TIN from its customers.
RFIs should check the new US TIN codes and ensure they are reporting these correctly.
Please reach out if you would like to know more about the above and the support EY can provide. Rob Davies Kelum Kumarasinghe Remali Vilat
Your EY contacts:
Robert Davies
+61 2 9248 5091
Jacqueline Bennett
+61 2 9248 4542
Kelum Kumarasinghe
+61 2 9248 4929
Remali Vilathgamuwa
+61 2 9248 5001
Partner at EY, Global Director of Customer Tax Operations & Reporting Services (CTORS)
1 年Excellent observations and advice, Jacqueline. I believe the ATO has some hefty penalties in their arsenal – any sign of them starting to use those yet?