US, Australia Strike FATCA Agreement

The U.S. Department of the Treasury has added the name of yet another nation -- Australia -- to its growingAustralia Flag list of countries with which the US has reached an accord regarding the reporting of offshore accounts to the Internal Revenue Service, according to The newly completed intergovernmental agreement (IGA) makes Australia one of nearly four dozen countries that promised in writing to report assets to American tax authorities as the US attempts to eradicate the use of foreign accounts to evade tax liability domestically.

Australian governmental leaders and banking authorities cheered the signing of the agreement. The requirements originally imposed by the US's passage of the Foreign Account Tax Compliance Act (FATCA) on foreign financial institutions were "onerous," according to Australia's Financial Services Commission. Without the agreement, Australian institutions would have been subject to the FATCA's withholding requirements, would have been required to report information on US account holders directly to the IRS, and would have had to close the accounts of account holders who did not provide certain tax-related information to the IRS.

The IGA helps Australian institutions shed some of those burdens. "It is significant for the financial services industry in reducing red tape and will save hundreds of millions of dollars in compliance costs," Financial Services Commission chief John Brogdon stated. These reductions and savings stem largely from the IGA's simplification of the due diligence requirements created by the FATCA.