What is the CRS?

The Common Reporting Standard (CRS) is a standardised automatic exchange model established by the Organisation for Economic Co-operation and Development which aims to reduce international tax evasion by providing a global standard for the reporting of financial account information of foreign tax residents. It has been referred to as the "global version of FATCA". The CRS comes into effect in Australia on 1 July 2017.

Which organisations will be affected by the CRS?

The CRS will apply to those Australian banks and other financial institutions that are presently caught by FATCA.

These organisations will need to provide the ATO with financial account information of foreign tax residents. The ATO will then provide this information annually to participating tax authorities in other jurisdictions in exchange for information on Australian tax residents. Ideally, this will help in ensuring that Australians with accounts held overseas are complying with Australian taxation law.

How does the CRS differ from FATCA?

The most significant and obvious difference is that financial institutions will now need to comply with due diligence procedures regarding all reportable accounts held by any foreign tax residents rather than only those accounts held by US citizens. This will significantly increase the compliance burden upon the organisations affected. The CRS also has a wider scope in respect to the individual accounts required to be reported on. For example, FATCA does not require reports on individual accounts with a balance of less than $50,000, whereas the CRS has not set a minimum threshold.

What will be required of reporting financial institutions?

  • Provide annual reports to the Commissioner of Taxation regarding accounts held by foreign tax residents – first reports will be due on 31 July 2018.
  • Retain for 5 years written records of these reports along with the procedures by which the financial institution determines what is a 'reportable account'.

What information will be included in these reports?

The information required by the ATO will depend on the type of account, but in general it will include:

  • Name, address, Taxpayer Identification Number and date and place of birth of account holder or controlling persons of entities holding accounts
  • Account number
  • Name and identifying number of the reporting financial institution
  • Account balance or value as of the end of the reporting year
  • Depending on the type of account – the total amount of interest paid or credited to the account, total gross amount of dividends, other income generated with respect to the assets held in the account and proceeds from the sale or redemption of property.

Currently, financial institutions are obligated to continue reporting to the Commissioner of Taxation under FATCA.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.