Financial Services Council (FSC) CEO, John Brogden is continuing discussions with senior US Treasury and IRS officials, relevant members of Congress and congressional representatives on the Foreign Account Tax Compliance Act (FATCA) regime.
Draft FATCA regulations released in February 2012 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.
Currently the regime will require Australian foreign financial institutions (FFIs), 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 per cent tax on US-connected payments for that member.
In April, the FSC made submissions on the draft regulations, which highlighted the nature of the Australian superannuation system and argued for its exemption from the regulations.
It also called for an intergovernmental agreement to facilitate transfer of reported data from the ATO to the IRS.
Following the submissions, John Brogden briefed US Treasury and gave evidence to an IRS hearing in Washington.
Speaking from Washington DC, Brogden said: “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.
“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 Australian financial services industry is in danger of being unable to comply with the FATCA regulations when they come into effect on January 1, 2013. The final regulations are expected in September this year.
“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.”
