The US Government has released final regulations for its Foreign Account Tax Compliance Act (FATCA), confirming the exemption of Australian super funds and some limited life debt investment entities.
Although it was anticipated that superannuation funds would be specified as non-reporting financial institutions in an Australian inter-governmental agreement (IGA), which is still pending approval, Australian super funds can now rely on the deemed-compliance exemption, King and Wood Mallesons partner Suzanne Gibson said.
The regulations also extended grandfathering of FATCA withholdings from 1 January 2013 to 1 January 2014.
Gibson said the outcome of the IGA would make the FATCA exemptions clearer, but the release of final regulations meant that Australian financial institutions could prepare for the regime by considering new deemed-compliance categories and negotiating FATCA risk-allocation clauses in transactional documents.
Certain limited life debt investment entities that existed on 31 December 2011 will also be considered as compliant foreign financial institutions (FFIs) by the US and will not be required to report on account holders until 1 January 2017.
However, Gibson said the exemption was prescriptive and unreliable and should be determined on a case-by-case basis.
"This exemption seems to be designed for pre-existing securitisation vehicles and issuers of other forms of collateralised debt or loan obligations," she said.
"The exemption requires the trustees to have been granted limited powers under the constitutive documents which would be insufficient to enable them to become participating FFIs."
Managed funds and other trusts could be assisted by exemptions for sponsored investment entities or sponsored controlled foreign corporations where the sponsor commits to perform due diligence, withholding, reporting and other FATCA obligations on behalf of the sponsored FFI, Gibson said.
It was unclear if unregistered managed funds schemes were protected, as they were not "regulated", Gibson said.
