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Kaptin M
22nd Aug 2004, 08:50
From another PPRuNer comes this....


ATO in off-shore crackdown


THE Australian Tax Office (ATO) will investigate hundreds of secret Swiss bank accounts and target tax havens this year in a crackdown on offshore tax-evasion.

The campaign could affect everyone from retirees earning income from a foreign pension to corporate criminals.

In the wake of the scandal surrounding disgraced stockbroker Rene Rivkin's activities in Switzerland, the ATO will analyse transactions involving accounts in that country, as well as in Singapore, Austria, Belgium and Luxembourg.

Banking secrecy provisions there allow tax cheats and corporate criminals to hide income and evade the scrutiny of Australian authorities.

Meanwhile, treaty negotiations are under way with tax havens Jersey, Guernsey, Antigua and Barbuda, Bermuda and the Isle of Man.

Australia wants to secure information-sharing agreements that would help it prevent residents squirrelling away funds out of reach of the ATO.

As the tax office unleashes hundreds of extra staff on tax compliance auditing this year, Commissioner Michael Carmody has already signalled increased attention will be focused on extra income earned from the property boom, including capital gains and rental expense deductions.

Accountants and tax agents are also set to come under the ATO microscope.

"Our current profiling has identified at least 700 agents who we will contact to discuss the results and possible reasons," Mr Carmody said.

"As necessary, compliance responses for the agent and his or her clients will be developed."

Separately, investigators will audit 1450 individuals earning overseas income in a targeted campaign expected to recover millions in unrecouped revenue.

An ATO spokeswoman said the investigation was sparked by specific information, and people should come forward early to declare foreign earnings.

"Its primary focus is aimed specifically at foreign income derived, for example, from foreign pensions, interest and dividends," she said.

"The tax office is encouraging Australian residents who derive income from overseas sources to declare that income in their tax returns."

Treasurer Peter Costello has pledged to reduce offshore evasion, but the battle could prove fairly tough.

Negotiations with tax-haven governments have been reasonably slow, and recovery efforts last year yielded just $1.4 million from 33 individual taxpayers.

Rivkin - last week stripped of his licence to provide financial services - reportedly used Swiss accounts to hide shares in Offset Alpine - a company whose premises were destroyed in a mysterious 1993 fire.

Rivkin is currently serving a nine-month periodic detention sentence for insider trading involving Qantas shares, but was barred from giving financial advice for medical reasons.

This financial year, the tax office will allocate 600 extra staff to compliance, at a cost of $3.5 billion - which is more than half its total budget.

The ATO hopes to recover at least twice that amount. Last year, it recovered $6.4 billion - up $270 million.

Most of the extra effort will focus on audits, investigations and prosecutions.

"We will be increasing our attention to serious and purposeful non-compliance with our revenue laws, including through the use of tax havens and countries with bank-secrecy laws," Mr Carmody said.

itchybum
22nd Aug 2004, 09:29
Kaptin, there's a big difference between individuals earning overseas income and individuals (pilots, for example) earning their incomes whilst living overseas. It's the former the ATO has a beef with, rightly or wrongly.

The typical ex-pat pilot has declared himself a "non-resident for taxation purposes" and shouldn't have a problem.

Maybe when the pilot retires and returns to Australia, and tries to keep his dough offshore until he wants to spend it, then he might have a problem. Is that what you're getting at?

GT-R
22nd Aug 2004, 09:30
And rightly so.

A lot of us are sick of people working and 'living' overseas and using our roads, services, benefits etc when we are paying 47c in to the dollar.

itchybum
22nd Aug 2004, 09:48
GT-R did you think before you blurted that out?

Anyone using the roads is paying taxes in the petrol he uses, not to mention car rego and insurance, even on a rental.

As for "services, benefits", what exactly are you talking about? Medicare? Anyone who uses that is no longer free of a tax-burden and pays just like a resident.

So what's your problem???

By the way, you forgot to mention your 1.5% levy. Maybe you just WISH you were in the top bracket.... :rolleyes:

Kaptin M
22nd Aug 2004, 09:50
"The typical ex-pat pilot has declared himself a "non-resident for taxation purposes""....this is more what I'm getting at, ib.
If indeed some pilots have delared themselves as non-residents, do they in fact qualify as such, under the ATO's guidelines?

And btw GT-R, some of us living o/s are sick of having to pay tax at the marginal (highest) rate on EVERY dollar made in Australia through investments bought IN Australia from (already taxed) money made OUTSIDE Oz.

Obie
22nd Aug 2004, 10:26
Ah! Yes...as usual, when the chips are down, the GREED rises to the top!

Gnadenburg
22nd Aug 2004, 10:40
Kaptain M

You should get yourself a good accountant.

I don't see why you should be paying tax at the highest marginal rate, if you are residing overseas.

I agree with Itchybum, the concern for pilots is when they retire back to Australia.

I have heard of a myriad of defensive tax options involving the setting up of offshore companies etc. Lets not discuss them on pprune though.

itchybum
22nd Aug 2004, 12:13
If indeed some pilots have delared themselves as non-residents, do they in fact qualify as such, under the ATO's guidelines? I believe so. On your final tax return form prior to leaving Australia, one of the questions asked is something like:

"Will this be your final return lodged?" or words to that effect. If you tick "Yes" then I suppose they leave you alone. That is at least the intent of that particualr question but do they ever really leave you alone???

Can't help re the tax rates on your Aussie investments but as it is your primary source of income in Australia, I would've thought they'd NOT be subject to the top marginal rate on the first to last dollar earned. But then I'm not a bean-counter (and happy for it...)

coaldemon
22nd Aug 2004, 13:06
My understanding is that if you are a nonresident living offshore then the only tax payable on local investments is withholding tax (usually at a rate of 10%) and the entity paying the dividend is liable to collect this. If the tax office is chasing pilots as you suggest then I think they have a few high profile sports stars to investigate first. But like all things if you pay for some decent advice in the first place rather than the advice from a half cut pilot in a bar in Bangkok you may sleep better at night.
You do need to be careful of returning to the country as well as how you leave and what boxes you tick on that ATO return.

404 Titan
22nd Aug 2004, 14:16
Kap,

Ask yourself these questions.
1. Have you lived overseas for more than 180 days per year?
2. If you are married or defacto, and you are still together, does your partner live with you?
3. Is your primary residence outside Australia?
4. Have you declared yourself a non-resident for tax purposes?
5. Can you substantiate the above?

If you answered yes to the above questions, you have nothing to worry about. You are most definitely not a resident for tax purposes.

Kaptin M
22nd Aug 2004, 14:48
Gardenbug, I believe that I have a good accountant - KBM/Kendalls (for the past 20+ years) - who, imo, have acted as just another arm of the ATO!!!
But I was still "substantially" audited last tax year!!

Believe me, you will NEED to prove that - as an Australian passport holder - you are paying tax somewhere.....in a country that has a reciprocal tax agreement (or dispensation) with OZ.

" If you are married or defacto, and you are still together, does your partner live with you?" Now THERE'S a variable!!

With respect to SOME of the o/s contracts currently being offered, "Caveat emptor"

If it seems TOO good to be true, it probably IS!!

404 Titan
22nd Aug 2004, 16:18
Kap

By your comment are you saying I don’t know what I am talking about? While I may not have practiced as an accountant for many years, I am very familiar with personal tax laws and how they apply to non-residents. The article you have produced is referring to Australian residents who are earning income in tax havens. I assume you and your family live in Japan. I live in Hong Kong. Both you and I aren’t residents of Australia for tax purposes.

The reference to spouse was very deliberate. One of the ATO’s tests is where your family live. As you know in Australia being married or defacto is considered the same. If you are separated, this can affect you residency status for tax purposes.

Here is a link to the ATO web sight that will help you determine your residency status for tax purposes.

http://www.ato.gov.au/individuals/content.asp?doc=/content/12503.htm&pc=001/002/012/003&mnu=6742&mfp=001/002&st=&cy=1

Kaptin M
22nd Aug 2004, 21:54
"......are you saying I don’t know what I am talking about?

No. not at all 404 T - I was merely commenting on the "If...or....and...does" of #3, and thinking that some gentlemen might be qualified to answer "Yes" AND "No"! :E

Some time during the past 12 months, I was warned that the ATO would be targeting pilots - esp. those earning an income o/s, to determine whether they should be paying tax in Oz (dependant upon their taxation arrangements overseas).
Fortunately for me, my case was quite cut and dried, as I have been out of the country for well over a decade, and have been paying tax in countries that have reciprocal tax agreements with Australia.
However, they still went through me - via my accountant - with a fine tooth comb wrt the little remaining interests I have in Australia. The State Gov't was also involved, providing documentation that showed they had accessed Federal Government Dep't of Immigration records.

Therefore I thought it might be timely to warn other pilots to be careful.

Don't risk heavy penalties + payment of back taxes.

If you are in the least bit doubtful, pay some $$'s and consult an accountant.

Terrain Terrain
24th Aug 2004, 13:00
Kaptain M,
First allow me to start with a disclaimer. I'm not posting to start a flame war and certainly don't dispute that you've been audited. However, I must question why you've posted the comments you have re the tax situation of foreign based Aussie pilots.

- Australian tax liability is dependent upon residence, not citizenship. Whatever passport is tucked into your flight bag bears no relevence. However, this is not to say that the ATO may search for all pilots who are Australian citizens to then assess their tax liability. You will note that in your own quote of an ATO comment that they refer to residents, not citizens.

- Additionally, at the present time (and this isn't going to change anytime soon) Australia doesn't have a chinamans chance of getting financial data out of Swiss banks. They only way they can track it is looking at what left Australia and where it went to. If you pass it through a country without a data-sharing arrangement with the ATO before sending it to our watchmaking friends, you're home and hosed.

Terrain Terrain.

Kaptin M
24th Aug 2004, 13:56
"Australian tax liability is dependent upon residence"
Totally agreed, T T, the problem being some pilots are NOT "foreign based Aussie pilots" with foreign residential status.

OzExpat
24th Aug 2004, 20:21
Sounds like you're referring to the so-called "tour pilots" KM. There's plenty of them around the place, especially in PNG.