The Tax Laws Amendment (Implementation of the FATCA Agreement) Bill 2014 was assented to on 30 June 2014. Background.

The Act amends the Taxation Administration Act 1953 to require Australian financial institutions to collect information about their customers that are likely to be taxpayers in the US and to provide that information to the Commissioner of Taxation who will, in turn, provide that information to the US Internal Revenue Service.

These amendments give effect to the Australian Government‘s commitments as set out in the Agreement between the Government of Australia and the Government of the United States of America to Improve International Tax Compliance and to Implement FATCA.

The Foreign Account Tax Compliance Act (FATCA) is aimed at detecting US taxpayers who use accounts with offshore financial institutions to conceal income and assets from the IRS.

Reporting Australian Financial Institutions that maintain U.S. Reportable Accounts will need to follow specific due diligence procedures and provide information about those accounts as specified in the FATCA Agreement to the Commissioner.

FATCA requires foreign financial institutions (including Australian financial institutions) to report details of accounts held by their US customers to the US Internal Revenue Service (IRS). Non-compliant financial institutions will face a 30 per cent withholding tax on their US sourced income.

The following entities and financial products are specifically excluded from the FATCA rules:

• All Australian superannuation entities and products, pooled superannuation trusts and entities that invest exclusively for or on behalf of Australian superannuation entities
• Specified Federal and State Government entities (including the Reserve Bank) and investment funds (such as the Future Fund)
• International organisations with an office in Australia
• Small Australian financial institutions (including those with primarily Australian and New Zealand resident account holders)
• First Home Saver Accounts (FHSAs) and FHSA life insurance policies
• Most exempt life insurance policies
• Employee share schemes and employee share trusts
• Funeral policies
• Scholarship plans
• Australian equivalents to any financial products excluded under another country‘s IGA.