Effective 1 July 2017 new tax regulations called the "Common Reporting Standards" or "Automatic Exchange of Information" kick in to compel all Australian Financial Institutions to collect tax residency information of new and existing account-holders. Singapore Financial Institutions have begun collecting such information on 1 January 2017. Singapore and Australia are tax information exchange partners and will begin exchanging financial account information on each other's tax residents in 2018.
Okay, the boring stuff aside. I really should have written an article on this sooner since it affects every single Sinkie in Australia and everyone who has had or currently holds a bank account in Australia is being or will be reviewed as part of their bank's obligations to the ATO.
So what is this CRS or AEOI about?
First off, the treaty we're talking about here is NOT the double tax treaty between Australia-Singapore everyone is assuming that to be. It really irritates me some smart alecks just keep using the wrong terminology. CRS, or AEOI is a systematic and automatic away for cross border information exchange of financial account information. The difference between CRS/AEOI and the usual tax information exchange protocols between countries is not just the legal basis, but the ease of accessibility and the volume of information exchanged. Under CRS, even the bank account information of the man on the street does not get spared, which is frightening considering many Sinkies keep their Sinkie investments out of the ATO's radar to avoid getting taxed under Australia's worldwide taxation system for residents.
What will CRS do to me?
CRS primarily affects Australia-based Singaporeans (as opposed to Singapore-based Sinkies) because Australia practices a world-wide taxation system. If you've always been living and working in Australia on whatever visa (doesn't matter) then you're likely to be considered an Australian tax resident and you'll have to declare all your investment income no matter where they're earned, and be potentially subjected to tax on those gains. So if say, you kept a bank account in Singapore where all the dividends on your SGX investments are being paid into and you did not declare them in Australia, then you had better start declaring them soon because the bank which holds your account will report your income and balances to the IRAS who in turn may pass on that information to the ATO.
Singapore-based sinkies have nothing to worry about because Sinkieland does not tax the foreign income of Singapore resident individuals (for entities, its a different story though). Hence, while the IRAS may be receiving ATO's information on the $5,000 interest you earn on your secret OZ bank deposits there's no incentive to bother themselves with that information.
How does CRS work?
Let me put it upfront that i'm not encouraging you to evade taxes and under no circumstances should you withhold any information from the ATO or IRAS for tax filing purposes in order to avoid your fair share of taxes. Disclaimers out of the way:
CRS essentially works by assuming you're a resident of a certain country based on certain tax indicators you possess when you first opened the bank account or updated certain particulars along the years. All financial institutions are generally given 2 years from a certain cut-off date (1 July 2017 for Australia, 1 January 2017 for Singapore) to review all their pre-existing accounts based on a prescribed set of search parameters and deem those accounts with foreign tax indicators as a tax resident of wherever country that tax indicator belongs to.
For example, if you had provided a Singapore telephone number for your Australia bank account and you had not bothered to update it with your existing Australia number, you will be "deemed" to be a Singapore tax resident and your bank balance and transaction activity will get passed onto the IRAS by September of each year. Some banks may do some form of outreach to get you to provide a declaration of where you are actually tax resident before making that assumption. Some banks don't. The regulations don't actually require your bank to contact you for a confirmation.
What do the banks actually review? How do banks actually determine whether you're reportable? There are a number of elections, exemptions and permutations in the regulations so depending on how the bank wishes to go about the account review process it may differ from bank to bank. The types of information reviewed are usually indicators of where you're resident for tax purposes. For individuals, you're usually considered resident for tax purposes where you live and work so the "tax indicators" revolve around information such as mailing addresses and telephone numbers. Some banks may go all the way and take a broad brush approach (i.e. review everything in your file regardless of whether that's required). Otherwise, there's usually just a basic set of information they will look through, unless you're a high net worth individual in which case they'll go down to the extent of seeking a confirmation from your relationship manager (a real relationship manager who manages your million dollar account, not your run-of-the-mill Ah-Gao Ah-mao personal bankers).
How can Aussie-based sinkies avoid having their Singapore bank account information reported to the ATO?
Like i said upfront, this article is not about tax avoidance and you shouldn't be under-reporting. However, for sinkies who have legitimate concerns about data privacy there's enough above to help you understand the implications.
Any questions feel free to comment below. I'll answer when I have time.
Okay, the boring stuff aside. I really should have written an article on this sooner since it affects every single Sinkie in Australia and everyone who has had or currently holds a bank account in Australia is being or will be reviewed as part of their bank's obligations to the ATO.
So what is this CRS or AEOI about?
First off, the treaty we're talking about here is NOT the double tax treaty between Australia-Singapore everyone is assuming that to be. It really irritates me some smart alecks just keep using the wrong terminology. CRS, or AEOI is a systematic and automatic away for cross border information exchange of financial account information. The difference between CRS/AEOI and the usual tax information exchange protocols between countries is not just the legal basis, but the ease of accessibility and the volume of information exchanged. Under CRS, even the bank account information of the man on the street does not get spared, which is frightening considering many Sinkies keep their Sinkie investments out of the ATO's radar to avoid getting taxed under Australia's worldwide taxation system for residents.
What will CRS do to me?
CRS primarily affects Australia-based Singaporeans (as opposed to Singapore-based Sinkies) because Australia practices a world-wide taxation system. If you've always been living and working in Australia on whatever visa (doesn't matter) then you're likely to be considered an Australian tax resident and you'll have to declare all your investment income no matter where they're earned, and be potentially subjected to tax on those gains. So if say, you kept a bank account in Singapore where all the dividends on your SGX investments are being paid into and you did not declare them in Australia, then you had better start declaring them soon because the bank which holds your account will report your income and balances to the IRAS who in turn may pass on that information to the ATO.
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| No shit, the gahment knows you better than yourself. |
Singapore-based sinkies have nothing to worry about because Sinkieland does not tax the foreign income of Singapore resident individuals (for entities, its a different story though). Hence, while the IRAS may be receiving ATO's information on the $5,000 interest you earn on your secret OZ bank deposits there's no incentive to bother themselves with that information.
How does CRS work?
Let me put it upfront that i'm not encouraging you to evade taxes and under no circumstances should you withhold any information from the ATO or IRAS for tax filing purposes in order to avoid your fair share of taxes. Disclaimers out of the way:
CRS essentially works by assuming you're a resident of a certain country based on certain tax indicators you possess when you first opened the bank account or updated certain particulars along the years. All financial institutions are generally given 2 years from a certain cut-off date (1 July 2017 for Australia, 1 January 2017 for Singapore) to review all their pre-existing accounts based on a prescribed set of search parameters and deem those accounts with foreign tax indicators as a tax resident of wherever country that tax indicator belongs to.
For example, if you had provided a Singapore telephone number for your Australia bank account and you had not bothered to update it with your existing Australia number, you will be "deemed" to be a Singapore tax resident and your bank balance and transaction activity will get passed onto the IRAS by September of each year. Some banks may do some form of outreach to get you to provide a declaration of where you are actually tax resident before making that assumption. Some banks don't. The regulations don't actually require your bank to contact you for a confirmation.
What do the banks actually review? How do banks actually determine whether you're reportable? There are a number of elections, exemptions and permutations in the regulations so depending on how the bank wishes to go about the account review process it may differ from bank to bank. The types of information reviewed are usually indicators of where you're resident for tax purposes. For individuals, you're usually considered resident for tax purposes where you live and work so the "tax indicators" revolve around information such as mailing addresses and telephone numbers. Some banks may go all the way and take a broad brush approach (i.e. review everything in your file regardless of whether that's required). Otherwise, there's usually just a basic set of information they will look through, unless you're a high net worth individual in which case they'll go down to the extent of seeking a confirmation from your relationship manager (a real relationship manager who manages your million dollar account, not your run-of-the-mill Ah-Gao Ah-mao personal bankers).
How can Aussie-based sinkies avoid having their Singapore bank account information reported to the ATO?
Like i said upfront, this article is not about tax avoidance and you shouldn't be under-reporting. However, for sinkies who have legitimate concerns about data privacy there's enough above to help you understand the implications.
Any questions feel free to comment below. I'll answer when I have time.
Does that mean you have to declare the CPF interest as Aust Tax resident ?
ReplyDeleteIf that is considered taxable under Aust tax rules then yes. But practically CPF is not a reporting entity for now.
DeleteThank you for sharing such information. This blog is a treasure trove to would-be migrants like me.
ReplyDeleteA sincere "thank you" to each & every contributor in this blog.