Financial Services Council (FSC) CEO, John Brogden, has recently visited Washington DC to continue discussions with senior US Treasury and IRS officials, relevant members of Congress and congressional representatives on the Foreign Account Tax Compliance Act (FATCA) regime.

 

Draft FATCA regulations released in February 2012 sent shockwaves through the Australian Financial Services industry when it became apparent that superannuation funds would not be exempt from the US reporting and withholding requirements under FATCA.

 

Currently the regime will require Australian foreign financial institutions (FFIs), includingsuperannuation funds, to collect detailed information on their members to determine whether an individual member’s financial and residency arrangements make them a U.S. taxpayer. If so, the FATCA regime requires the fund to report this information to the IRS. However, if the account holder does not provide the necessary information the fund will be required to withhold a 30 per cent tax on U.S.-connected payments for that member.

 

In April, the FSC made submissions on the draft regulations which highlighted the nature of the Australian superannuation system and argued for its exemption from the regulations. It also called for an intergovernmental agreement to facilitate transfer of reported data from the ATO to the IRS. Following the submissions, John Brogden briefed US Treasury and gave evidence to an IRS hearing in Washington.

 

Mr Brogden said the Australian financial services industry is in danger of being unable to comply with the FATCA regulations when they come into effect on 1 January 2013. The final regulations are expected to be released in September 2012.

 

“It is clear from our discussions with US Government officials that a strong public statement is required from the Australian government calling for the commencement of talks to enter into an intergovernmental agreement with the United States.

 

“An intergovernmental agreement has the potential to significantly reduce the FATCA compliance burden that will be faced by the Australian financial services industry and will ensure Australian firms are not placed in the position of having to breach local laws in order to comply with US laws”, Mr Brogden said.

 

The FSC is working with other industry bodies in Australia, including the Australian Bankers’ Association, to ensure there is a consistent and coordinated approach to FACTA.