Getting CRS: Australian implementing legislation finalised

It is now time for Australian financial institutions to move on CRS.

• Australian implementing legislation has been finalised.
• You need to be prepared by 1 July 2017.
• The scope of CRS and applicable penalties have been expanded

The next FATCA reporting deadline is 31 July 2016. The uncertainty around listed entities continues.

How has the CRS implementing legislation changed?

The Australian Parliament has passed legislation implementing the OECD Standard for Automatic Exchange of Financial Account Information (known as the Common Reporting Standard, or CRS). The Bill currently awaits Royal Assent.

There are a number of significant changes from the exposure draft. They include:

• (1 July 2017 start date) the start date for CRS is now 1 July 2017, rather than 1 January 2017. The first reporting of accounts is still required by 31 July 2018;
• (no deferral) Financial Institutions can no longer defer their reporting obligations for 12 months;
  (new penalties) penalties apply for Reporting Financial Institutions that fail to obtain required self-certifications of tax residence from Account Holders;
• (purpose based anti-avoidance rule) a provision has been included which allows the Commissioner to require a Financial Institution to act as a Reporting Financial Institution, and to treat an account as a Reportable Account, where an arrangement or transaction has been entered into for the dominant purpose of avoiding the CRS; and
• (Pre-existing Entity Accounts reviewed earlier) higher value Pre-existing Entity Accounts must be reviewed by 31 July 2018 (rather than 31 July 2019).

FATCA pressure points

Reporting due by 31 July 2016

By 31 July 2016, Reporting Australian Financial Institutions under the FATCA Intergovernmental Agreement must report to the Australian Tax Office on:

a. U.S. reportable accounts and recalcitrant accounts for the 2015 calendar year. This includes Pre-existing Lower Value Individual Accounts and    Pre-existing Entity Accounts, the review of which must be completed by 30 June 2016; and

b.payments to Non-participating Financial Institutions made in the 2015 calendar year.

Continuing uncertainty for listed entity reporting

Investment Entities whose interests are regularly traded on an established securities market must now report on holders that are registered on the books of the Investment Entity. Many listed entities are currently facing practical difficulties in complying with these requirements.

What do I need to do?

CRS. Reporting Financial Institutions should ensure that they are prepared for the introduction of CRS from 1 July 2017. Entities need to determine whether they are characterised as “Reporting Financial Institutions” under the CRS, and should start the process of adapting their systems and updating their account documentation (terms and conditions, application forms, disclosure documents) to ensure they can meet the due diligence and reporting requirements.

FATCA.Reporting Australian Financial Institutions should ensure they will be ready to report by 31 July 2016 on what is potentially a large number of account holders and counterparties. Listed entities should understand how the expiry of the transitional period for regularly traded interests affects them.