Good to Great: How to Scale With an Outsourced CFO

We have all forgotten things, Project DO IT is a safe approach for declaring any foreign income or assets you may have missed and is a generous initiative by the ATO.

What is Project DO IT? 

Project DO IT is an initiative that allows taxpayers to voluntarily disclose previously unreported foreign income and assets. Those who voluntarily disclose receive benefits.

In order to receive the benefits under the initiative, taxpayers must lodge a Disclosure Statement before 19 December 2014 detailing omitted foreign income, capital gains or over-claimed deductions.

Who should participate?

Any taxpayers with previously undisclosed foreign income or assets. 

What are the benefits?

Those who voluntarily disclose receive the following benefits:

• Assessment only for tax years where the time limit for amendment has not yet expired (generally the last 4 years);
• Liability to tax shortfall of 10% on any tax owing (otherwise the penalty can be as high as 90%);
• The ATO will not investigate the disclosure for the purposes of prosecuting the taxpayer for a criminal offence nor refer the matter for criminal investigations by another law enforcement agency;
• Assurance and certainty of the tax effects of winding up offshore structures or transferring offshore assets to Australian entities.

What is undisclosed foreign income or assets?

Income or assets that should be considered include (but are not limited to):

• Loans from foreign companies in which you are a shareholder;
• Income or assets from foreign deceased estates;
• Overseas pensions;
• Undeclared offshore business interests;
• Assets or income from investments made while previously living overseas.

Who cannot participate?

Taxpayers cannot voluntarily disclose and access the above benefits where:

• The ATO is already auditing you in relation to offshore income, capital gains or over-claimed deductions;
• You have received a compulsory information-gathering notice relating to offshore income, capital gains or over-claimed deductions;
• You have been involved in promoting or marketing tax evasion schemes;
• You are already under criminal investigation concerning tax-related criminal offences
• The foreign assets or income were derived from serious criminal offences unrelated to tax;
• You have not complied with specific obligations from a previous offshore voluntary disclosure initiative you were involved in.

How does the ATO detect international activities?

In recent years the ATO has developed data matching and analysis abilities utilising relationships and information from:

• Information gathering from 100 tax treaty jurisdictions;
• Automatic information exchanges with 42 countries;
• Transactional data as provided by AUSTRAC.

What happens if you do not voluntarily disclose?

Until a disclosure statement is received, you are subject to normal compliance activities. Non-disclosure risks include:

• Unlimited time for the ATO to review tax affairs and amend tax returns if you have engaged in fraud or evasion;
• Assessment on tax, penalties and interest for all the years going back to the beginning of any offshore arrangement;
• Tax shortfall penalties of up to 90% of the tax owing (this is in addition to interest);
• Investigation for the purposes of criminal prosecution.