|ATO warns taxpayers to disclose foreign source income|
The ATO has issued Taxpayer Alert TA 2012/1 warning taxpayers of arrangements under which Australian resident taxpayers do not correctly include income and other taxable amounts from foreign sources in their assessable income for Australian tax purposes.
The arrangements involve Australian resident taxpayers deriving foreign sourced income that is either received in Australia or accumulated offshore. The ATO says foreign source income may include (but is not limited to) the following:
In the arrangement as described by the ATO, the taxpayer does not disclose their interest and/or involvement in deriving the foreign source income by:
The ATO says in certain circumstances, a promoter or third party may act as a beneficiary of the offshore structure or investment to conceal the true nature of the investment.
In relation to the arrangements, the ATO says foreign sourced income is assessable under s 6-5 of the ITAA 1997, and Div 6 of Pt III of the ITAA 1936. It also says any income accrued offshore may be attributable to taxpayers under Pt X of the ITAA 1936. The ATO notes that taxable capital gains may arise to the taxpayer on the disposal of offshore assets under Pts 3-1 and 3-3 of the ITAA 1997.
Further, the ATO says the arrangements which contain the features above may be considered a sham and Pt IVA may apply. For taxpayers who make full voluntary disclosures to the ATO, the Commissioner said any penalties imposed may be reduced by 80%.
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