The Association of Superannuation Funds of Australia (ASFA) has called for the urgent implementation of an inter-governmental agreement (IGA) between Australia and the US in light of the failure to exempt Australian superannuation funds from the US's intended Foreign Account Tax Compliance Act (FATCA).
ASFA said despite repeated submissions and suggestions to the US Treasury and the US Inland Revenue Service (IRS), the most recent draft regulations had failed to resolve the agreed exemption.
ASFA said foreign financial institutions (FFIs) faced a conundrum, as non-compliance with FATCA could result in significant financial penalties which could only be avoided through the provision of information which may breach Australia's Privacy Act.
It said the biggest benefit of a US/Australia IGA would be super funds' exemption from the FACTA regime, which had the potential to overcome the privacy concerns the industry had about the direct provision of personal information to foreign tax bodies.
It would enable the relevant data to be passed to the Australian Taxation Office (ATO) to be passed on to the IRS, ASFA said.
ASFA expected that the development of an IGA may come at a cost to the ATO and urged that those costs not be passed on to superannuation entities.
"As the clear intention of all parties is that regulated Australian superannuation entities be treated as deemed-compliant and thus exempted from FATCA reporting requirements, ASFA does not anticipate, and would strongly argue against, any of the Government's administration costs being attributable to superannuation entities," it said.
ASFA said early implementation of an IGA was necessary to ensure foreign financial institutions were exempt from the FATCA regime and did not face a 30 per cent withholding on any receipts of US source income.
