The Treasurer has signed an intergovernmental agreement with the Government of the United States of America to implement FATCA (Foreign Account Tax Compliance Act). FATCA was enacted by the US Congress to detect US taxpayers who use accounts with offshore financial institutions to conceal income from the US Internal Revenue Service (IRS).

Exempt Australian entities are listed in Annex II of the IGA.

They include a “Financial Institution with a Local Client Base” which satisfies the following requirements:
1. The Financial Institution must be licensed and regulated as a financial institution under the laws of Australia;
2. The Financial Institution must have no fixed place of business outside of Australia. For this purpose, a fixed place of business does not include a location that is not advertised to the public and from which the Financial Institution performs solely administrative support functions;
3. The Financial Institution must not solicit customers or Account Holders outside Australia.

Small local ADI’s and certain qualified credit card issuers are also exempt.

Treasury has released draft legislation to give effect to Australia’s obligations under this agreement and to address privacy law issues.

With effect from 1 July 2014, these amendments will require Australian financial institutions to collect information about their customers who are likely to be taxpayers in the United States of America and to provide that information to the Commissioner of Taxation who will, in turn provide that information to the IRS.