The ATO has reassured taxpayers that disclosing under Project DO IT will not give them a "red flag".
Project DO IT, the ATO's offshore voluntary disclosure initiative, offers benefits to taxpayers who bring their undeclared offshore income and assets back into Australia's tax system by 19 December 2014.
The ATO said feedback had raised taxpayer concerns that if they disclose they will be "red flagged" for future investigation. ATO Deputy Commissioner Michael Cranston said this was not the case and that the ATO was far more concerned with the taxpayers who don't disclose, rather than those who do. Mr Cranston said that the aim of Project DO IT was to provide one last chance for taxpayers to disclose before the net closes completely on offshore tax evasion. "These disclosures will enable us to put our resources onto the taxpayers who don't come forward," said Mr Cranston.
It should be emphasised that Project DO IT covers both "inadvertent" and "intentional actions" to hide offshore income and/or gains. The ATO has advised that where taxpayers may be unsure as to their eligibility for the initiative, they can contact the ATO's Project DO IT team to discuss the issue and this can be done anonymously.
Under Project DO IT, people disclosing their offshore assets will:
- only be assessed for applicable (open) periods of review (generally only the last four years);
- be liable for a shortfall penalty of 10% (low-level disclosures will attract minimal or no penalties);
- be liable for full shortfall interest charges;
- not be entitled to utilise any losses that arose in years for which they are not being assessed;
- be able to seek assurance regarding the ATO's tax treatment of repatriated offshore assets;
- be able to enter into a settlement deed to obtain additional certainty (where circumstances call for additional surety); and
- not be investigated or referred for criminal investigation by the ATO on the basis of their disclosures.
To receive the benefits of Project DO IT, the ATO said taxpayers must make a "truthful disclosure" before 19 December 2014 (or seek an extension). The ATO has issued a "disclosure statement" (available on the ATO website) to facilitate this. Until the taxpayer lodges, the ATO said its normal compliance activities will continue and if the taxpayer is detected first they will not be able to participate.
The ATO acknowledged that there may be circumstances where it could take some time to get all the required records. However, it said if taxpayers need time, they must inform the ATO as soon as possible that they want to make a disclosure, and to do this, they must lodge an "expression of interest" to participate in the initiative.
As at 6 November 2014, Project DO IT has seen more than 1,650 people come forward. Just 1,000 people have made disclosures of more than $190 million in income and over $1.1 billion in assets with more than 600 yet to make their disclosure.
Sources: ATO publication, Project DO IT: Disclose offshore income today, 21 July 2014, https://www.ato.gov.au/General/Correct-a-mistake-or-dispute-a-decision/In-detail/Project-DO-IT/Project-DO-IT; ATO media release, 27 October 2014, https://www.ato.gov.au/Media-centre/Articles/No-red-flag-for-coming-forward-under-Project-DO-IT; Commissioner's address to the Tax Bar Association, 6 November 2014, https://www.ato.gov.au/Media-centre/Speeches/Commissioner/Commissioner-s-address-to-the-Tax-Bar-Association/.