The CEO of the Financial Services Council (FSC) has headed to Washington DC this week to argue that Australian super funds should be exempt from the reach of the Foreign Account Tax Compliance Act (FACTA) regime.
Draft FATCA regulations released in February sent shockwaves through the Australian financial services industry when it became apparent that superannuation funds would not be exempt from the US reporting and withholding requirements under FATCA.
According to the FSC, the FACTA regime in its current incarnation will require Australian financial institutions, including superannuation funds, to collect detailed information on their members to determine whether an individual member’s financial and residency arrangements make them a US taxpayer.
If so, the FATCA regime requires the fund to report this information to the IRS. However, if the account holder does not provide the necessary information the fund will be required to withhold a 30% tax on US-connected payments for that member.
However, the FSC has been arguing since it made submissions on the draft regulations in April that the Australian superannuation system should be exempt from the FACTA regulations. It also called for an intergovernmental agreement to facilitate the transfer of reported data from the ATO to the
“We are continuing to work closely with US Treasury officials on the development of the final regulations to ensure they are on board to effectively carve out our superannuation schemes,” said FSC CEO John Brogden from Washington.
“We are also meeting with key members of congress to discuss the issue and to ensure that those responsible for writing the law in the first place know our predicament.”
The FSC is concerned that when the FATCA regulations when they come into effect on 1 January 2013, Australian financial services industry will be in danger of being unable to comply with the FATCA.
“It is clear from our discussions with US Government officials that a strong public statement is required from the Australian government calling for the commencement of talks to enter into an intergovernmental agreement with the United States,” said Brogden.
“An intergovernmental agreement has the potential to significantly reduce the FATCA compliance burden that will be faced by the Australian financial services industry and will ensure Australian firms are not placed in the position of having to breach local laws in order to comply with US laws.”