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IGA not a quick fix for FATCA
Australian superannuation funds may be exempt from the United States' Foreign Account Tax Compliance Act (FATCA) under an intergovernmental agreement (IGA) - but an IGA is not a FATCA "fix", King & Wood Mallesons senior associate Suzanne Gibson has warned.
Deputy Prime Minister and Treasurer Wayne Swan met with United States Treasury Secretary Tim Geithner yesterday to discuss an IGA to lessen the burden of FATCA on Australian financial institutions.
Gibson said that an IGA would resolve many of the industry's issues but was still not an optimal "fix".
Financial institutions would still need to report on their US account holders to the Australian Taxation Office and conduct the necessary due diligence, she said.
She said an IGA would increase costs, compliance and administrative burdens for Australian institutions with offshore branches or affiliates, as they would still be subjected to the full FATCA regime or an IGA in another jurisdiction.
The Australian Government would also need to commit substantial resources to manage the collection of information from Australian financial institutions, the exchange of information and ongoing collaboration with the US, according to Gibson.
Financial institutions would not need to deduct FATCA holdings, but instead would alert the relevant payer - which might create difficulties for Australian pooled vehicles such as managed funds, she said.
Gibson said an IGA would be tailored to the Australian landscape and would therefore exempt industry players such as super funds. It would also resolve Australian privacy law concerns in relation to FATCA, as Australian institutions would not need to sign an agreement directly with the US' Internal Revenue Service, she said.
Australian financial institutions should find it easier to comply with an IGA rather than FATCA, Gibson said, but some issues were as yet unresolved.
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