• 5 Reporting

    5.1 Reportable accounts

    A Financial Account is a Reportable Account if it is held by one or more Reportable Persons or by an entity that is a Passive NFE (with one or more Controlling Persons that is a Reportable Person.

    An RFI with no Reportable Accounts is not required to file a nil report for CRS or FATCA.

    5.2 Reportable persons

    A Reportable Person is an individual or entity that is resident under the tax laws of a foreign jurisdiction. Entity types with no residence under the tax laws of a foreign jurisdiction are reportable for that jurisdiction, if the entity's place of effective management or its principal office is located there. For example, if a partnership has no residency for tax purposes in a particular jurisdiction, but its place of effective management is located there, it is a Reportable Person for that jurisdiction.

    In most circumstances, an individual is tax resident in the jurisdiction where they live and work.  If an individual is required to file a tax return or pay tax in a jurisdiction, they are likely to be a tax resident there.

    In special cases where an individual has ties to more than one jurisdiction, they may be ‘dual resident’ - a tax resident of more than one country or jurisdiction.  For example, the U.S always treats their citizens as tax resident, regardless of where they live.  This means that a U.S. citizen is always a U.S. tax resident, even if they live and work in Australia. Where an individual is tax resident in more than one jurisdiction, any Financial Accounts held by that person or held by an Entity which has the individual as a Controlling Person are Reportable Accounts for each jurisdiction where they are tax resident.

    Certain entities are excluded from being Reportable Persons - any corporations with stock regularly traded on an established securities market (and their related entities) are excluded (see discussion in section 3.6), as are government entities, international organisations and central banks. Under the CRS, a Financial Institution is also excluded from being a Reportable Person (with the exceptions noted in section 4.9). For FATCA, a similar result is achieved by excluding an account held by a Financial Institution from being a Reportable Account.

    5.3 Reportable information for reportable accounts

    A Financial Account is a Reportable Account if it is held by one or more Reportable Persons or by a Passive NFE entity with one or more Controlling Persons that is a Reportable Person.

    Certain entities are excluded from being Reportable Persons - any corporations with regularly traded stock (see discussion in section 3.6) are excluded as are government entities, international organisations, central banks and Financial Institutions.

    For a Reportable Account, certain information needs to be reported for every account. Some information varies according to the type of account and information available concerning each Reportable Person for the account.

    For the CRS, the information required for account reporting is described in section I of the CRS, as interpreted by the CRS Commentary.

    For FATCA, the information required to be reported for an account is described in Article 2 of the FATCA Agreement.

    The reporting requirements of both FATCA and CRS should be read in conjunction with the respective Australian implementing legislation.

    Information for every reportable account

    CRS

    FATCA

    the name and an identifying number of the RFI

    the name and global intermediary identification number (GIIN, issued by the IRS) of the RFI

    account number (or if no account number, a functional equivalent)

    account number (or if no account number, a functional equivalent)

    the account balance or value at the end of the year or, if closed during the year, the fact of its closure (see section 5.6)

    the account balance or value at the end of the year or, if closed during the year, the balance or value immediately before closure (see section 5.6)

    For the CRS, the identifying number of the RFI should be the ABN. If the RFI does not have an ABN, it should use the GIIN it would use for FATCA reporting. In the exceptional circumstances where an RFI reports for the CRS but not for FATCA (and so does not have a GIIN) it may use its TFN (but is not required to do so).

    For FATCA, the identifying number of the RFI should be the GIIN obtained upon registration with the IRS.

    Information dependent on the type of account

    Under both the CRS and FATCA the information to be reported is:

    • for a Depository Account, the gross amount of interest paid or credited to the account during the calendar year
    • for a Custodial Account, the gross amount of interest, dividends and other income generated with respect to assets held in the account paid or credited to the account during the calendar year, and the gross proceeds from the sale or redemption of Financial Assets (CRS) or property (FATCA) during the calendar year
    • for any other account, the total gross amount paid or credited to the Account Holder in relation to the account during the calendar year with respect to which the Reporting Financial Institution is the obligor or debtor, including the aggregate amount of any redemption payments made to the Account Holder during the calendar year.

    The meaning of 'other income' for a Custodial Account is to be interpreted as any amount that is ordinary income under Australian tax law.

    Information for each reportable person

    The following information is required to be reported for each Reportable Person that is an Account Holder of the account and, in the case of an Account Holder that is an Entity, each Controlling Person of the Entity that is a Reportable Person, as described in the following table.

    CRS

    FATCA

    name

    name

    address

    address

    jurisdiction(s) of residence

    -

    taxpayer identification numbers issued by the jurisdictions of residence (see section 5.5)

    U.S. TIN (if any)

    if an individual, their date of birth

    if an individual, their date of birth, but only if their U.S. TIN is not recorded (see section 5.5)

    The address to be reported for an individual is their current residence address. If the RFI does not hold this address in its records, it should report the mailing address. The address to be reported for an entity is the address that the RFI has in its records for that entity.

    5.4 Account balance or value

    Generally the balance or value of a Financial Account is the balance or value that is calculated by the RFI for the purposes of reporting to the Account Holder. The balance to be reported is the balance or value of the account at the end of the reporting period (as a general rule, 31 December of a calendar year) except in the case of closed accounts (refer to discussion in section 5.6 of this Guidance).

    Where it is not possible (or usual business practice) to value an account at 31 December, an RFI should use the normal valuation point for the account that is nearest to 31 December.

    The balance or value in the case of Depository Accounts is the amount in the account on 31 December (unless the account is closed prior to that date). For instance, it is expected that a bank could determine the account balance or value of a cash or savings account as at 31 December of a calendar year.

    In the case of a cash value insurance contract, the RFI may report the cash value or surrender value of the account as at the most recent contract anniversary date falling within the relevant calendar year of reporting (if the company chooses to use the anniversary date of a policy for valuation purposes).

    The balance or value of an equity interest is the value calculated by the RFI for the purpose needing the most frequent determination of value, and the balance or value of a debt interest is its principal amount.

    The balance or value of the account is not to be reduced by any liabilities or obligations an Account Holder incurs for the account or any of the assets held in it. The account balance must not be reduced by any fees, penalties or other charges the Account Holder may be liable for if they terminate, transfer, surrender, liquidate or withdraw cash from the account.

    An account with a zero or negative balance is to be reported as having a balance or value of zero.

    5.5 Taxpayer Identification Numbers (TINs) & date of birth

    A TIN means a Taxpayer Identification Number. Some jurisdictions use a functional equivalent (for example the social security number in the case of the U.S.) as the TIN to identify their taxpayers. TIN is a common international term for what is referred to in the Australian tax system as a tax file number. The OECD's Automatic Exchange PortalExternal Link has information on the usage and structure of TINs as submitted by each participating jurisdiction.

    From 1 July 2017, a new account that is a Reportable Account under the CRS requires an RFI to obtain and report the foreign TIN and (in the case of individuals) the date of birth for each Reportable Person for the account. If the account is identified as reportable because of a self-certification upon opening the account, the RFI should require the TIN for each Reportable Person at the same time. The date of birth should also be obtained for individuals, if not already known by the RFI through other processes (such as AML/KYC procedures).

    For an account maintained by an RFI on 30 June 2017 (a Pre-existing Account) that is determined to be a Reportable Account under the CRS, the RFI must make reasonable efforts to obtain the TIN and date of birth of each associated Reportable Person if not already known. The same also applies to a new account from 1 July 2017 where a change of circumstances means it is later found to be associated with a Reportable Person. Reasonable effort means contacting the account holder, and examples of such contact are a letter, email or a request during an online login process. An unsuccessful request for this information should be followed by a second request within a year.

    For both new and pre-existing accounts, a TIN is not required if a TIN was not issued to the person by the relevant jurisdiction. Such a circumstance can arise because either:

    • TINs are not used by the jurisdiction (see the OECD's AutomaticExternal Link Exchange Portal); or
    • TINs are used in the jurisdiction, but the particular person, for a range of possible reasons, has not obtained or been issued a TIN for that jurisdiction.

    If a person claims not to have a TIN, this statement should be part of the self-certification collected for the account, unless the RFI reasonably determines that the person would not have a TIN for the relevant foreign jurisdiction, based on information on the OECD's AutomaticExternal Link Exchange Portal.

    In exceptional circumstances the customer may declare to be a foreign tax resident but not provide their TIN, because they need additional time to locate the TIN (for example, the customer is an exchange student whose TIN has always been solely in the possession of the student's parents, who reside overseas). In such exceptional cases, an RFI should obtain the missing TIN within a reasonable period of time, in no cases exceeding 90 days. The account should not proceed if after this period of time the person seeking the account cannot or refuses to provide the TIN.

    In the case of an account reportable for FATCA purposes (both new and pre-existing within the meaning of the FATCA Agreement), an RFI is required to report the U.S. TIN of each relevant U.S. Specified Person if the TIN is in the records of the RFI. If a TIN is not in the records of the RFI, a date of birth must be reported if it is in their records.

    A U.S. TIN would have been required for new individual accounts opened from 1 July 2014 where the account was a U.S. Reportable Account at the time of opening, as the self-certification by the account holder upon opening was required to include their U.S. TIN. For other U.S. Reportable Accounts it is possible that a U.S. TIN is not held by the RFI, either because it has not been requested or it was requested but the account holder has not provided it.

    As a consequence of the commencement of the CRS, an RFI is expected to have and report U.S. TINs for accounts opened from 1 July 2017 that are associated with Specified U.S. Persons when the account was opened. Progressively and increasingly, the RFI should also have and report U.S. TINs for Reportable Accounts opened prior to 1 July 2017 after making reasonable efforts to obtain such TINs.

    Validity and reasonableness of TINs

    Generally an RFI is not expected to conduct comprehensive checks on the issueor validity of TINs for every jurisdiction. An RFI can generally rely on the TINs provided in the self-certification or Documentary Evidence.

    The OECD's Automatic Exchange PortalExternal Link provides information on the issue, collection, practical structure and other specifications of TINs in each participating jurisdiction.

    If a self-certification from an account holder or their representative does not contain a TIN, and information included on the Automatic Exchange Portal indicates the account holder's jurisdiction of residence issues TINs to all tax residents, an RFI has reason to know that the self-certification may be unreliable or incorrect. In this case, the RFI is expected to seek either a valid (new) self-certification or a reasonable explanation why the account holder has not provided the TIN.

    However, an RFI is generally not required to confirm the format and other specifications of a TIN with the information on the Automatic Exchange Portal, or seek such information relating to non-participating jurisdictions not provided on the Portal. RFIs may still wish to do so to enhance the quality of information collected and minimise the administrative burden associated with any follow up on reporting an incorrect TIN. In this case, they may also use regional and national websites providing a TIN check module to further verify the accuracy of the TIN provided in the self-certification.

    Even so, an RFI should be familiar with, and check for, the validity of TINs from another jurisdiction in which the RFI or a Related Entity operates if:

    • there are simple or standard rules for TINs in that jurisdiction (such as the structure or number of digits), and
    • the IT systems used across the jurisdictions are shared or sufficiently similar that the validation task would not be onerous.

    The ATO will monitor international expectations on the use of the information on the OECD's Automatic Exchange Portal and update this guidance if necessary.

    5.6 Closed accounts

    For a Reportable Account closed during the year, CRS and FATCA reporting requirements are different. The CRS only requires reporting the closure, whereas FATCA requires reporting for the year of closure of the account balance or value immediately before closure.

    The account balance or value for FATCA reporting should be captured as close as practical to the date that procedures are commenced to close the account. An example of procedures to commence closure is when instructions are received to close the account. Amounts withdrawn in connection with the account closure should be included in the balance or value reported.

    5.7 Undocumented accounts - CRS

    The term 'undocumented account' has a specific meaning in the CRS. An undocumented account may arise when an RFI finds a 'hold mail' or 'in-care-of' indicium of foreign residency for a Pre-existing Individual Account and no other address on file, and the status of the account is not determined from other documentation.

    In the case of a Lower Value Account, if an electronic record search for the account has found a 'hold mail' or 'in-care-of' address in a foreign jurisdiction as the only recorded address for the account, but no other reportable indicia for the account holder, the RFI must take at least one of these actions:

    • conduct a paper record search of certain documents specified in the CRS; or
    • seek a self-certification or Documentary Evidence from the account holder to establish their tax residency.

    If the chosen course of action fails to resolve the status of the account, the RFI is required to attempt the other course of action. The account has undocumented account status unless and until one of these actions resolves the foreign address indicium.

    In the case of a High Value Account, if the enhanced review procedures required by the CRS are carried out on the account and the only indicium of foreign residency found is a 'hold mail' or 'in-care-of' address in a foreign jurisdiction with no other address on file, the RFI must seek a self-certification or Evidence from the account holder to establish their tax residency. If the self-certification is not received by the time of reporting, the account remains an undocumented account.

    The 'hold mail' or 'in-care-of' circumstances described above for Pre-existing Individual Accounts are the only situations where a reported account should be reported as 'undocumented'.

    An undocumented account must continue to be reported for subsequent years until its status is resolved. An RFI must, in the case of a High Value Account, repeat its request for documentation annually until resolved. Examples of making such a request could be by letter, email or a request during face to face contact. A request is not required for Lower Value Accounts on an annual basis; however, RFIs are encouraged to renew their request from time to time.

    5.8 Identification as reportable

    An account may be identified as reportable at any time during a calendar year, either upon the initial due diligence for the account, or later after a change in circumstances triggering a change in status of the account. In general, an account is only a Reportable Account from the time it is actually identified as such. This rule applies to FATCA in all cases, but is subject to transitional exceptions under the CRS in the case of two types of account:

    • a Pre-existing Individual Account with an aggregate balance or value exceeding $1 million on 30 June 2017 (a High Value Account)
    • a Pre-existing Entity Account with an aggregate balance or value exceeding $250,000 on 30 June 2017.

    An account within these categories under the CRS is a Reportable Account on and from 1 July 2017, regardless of when due diligence procedures are conducted, provided the account would have had that status if the review had been carried out on that day. Note that completing the due diligence on these accounts is permitted up until 31 July 2018. This transitional rule means that where the due diligence is done within the period 1 January 2018 to 31 July 2018 it will still be reported for 2017 by 31 July 2018 (if identified as reportable) for the 1 July 2017 to 31 December 2017 period, which is deemed to be a calendar year in the CRS legislation.

    Pre-existing Individual Accounts that are High Value Accounts (that is, exceed the $1 million threshold) on a test date later than 30 June 2017, and Pre-existing Entity Accounts that exceed the $250,000 threshold on a test date later than 30 June 2017, will follow the general rules in the CRS and its implementing legislation. That means an account is only a Reportable Account from the time it is actually identified as one, following the completion of due diligence procedures within the prescribed deadlines.

    A further scenario where an account may become a Reportable Account under the CRS is through the application of an anti-avoidance provision (see section 6.4).

    Reportable status may change during the calendar year. If an account holder becomes a foreign tax resident or is identified as a foreign tax resident during the year, the account has become reportable. However, an account identified as reportable during the year that has a change in circumstances such that it no longer has reportable status on 31 December that year is not reportable for that calendar year.

    The date periods of tax residency during the year are not reportable information.

    5.9 Transitional period for pre-existing individual accounts – CRS

    The CRS allows an extended period for carrying out due diligence on Pre-existing Individual Accounts that are Lower Value Accounts (accounts with a balance not exceeding $1 million on 30 June 2017). The review of Lower Value Accounts must be completed by 31 July 2019. A Lower Value Account is treated as a Reportable Account from the date it is identified as such. A Lower Value Account identified as a Reportable Account during 2017 may be reported in 2018, but if not reported in that year, it must be reported in 2019 (by 31 July 2019). A Lower Value Account identified as a Reportable Account during 2018 must be reported in 2019 (by 31 July 2019).

    A Pre-existing Individual Account that is a High Value Account as of 30 June 2017 has a deadline of 31 July 2018 for completing due diligence. Such an account will be treated as having been a Reportable Account on 1 July 2017 if subsequent due diligence identifies that the account would have been a Reportable Account on that day. In other words, it is a Reportable Account from 1 July 2017 and must be reported by 31 July 2018, regardless of whether the Reporting Financial Institution conducts its due diligence procedures on the account between 1 July 2017 to 31 December 2017 or 1 January 2018 to 31 July 2018.

    A Pre-existing Individual Account that was not a High Value Account as of 30 June 2017 but became a High Value Account because its balance exceeds $1 million on 31 December 2017 must be reviewed during the 2018 calendar year. If found to be a Reportable Account, if must be reported by 31 July 2019.

    5.10 Transitional period for pre-existing entity accounts – CRS

    The CRS legislation also allows an extended period for carrying out due diligence on a Pre-existing Entity Account with a balance or value exceeding $250,000 on 30 June 2017. The review must be completed by 31 July 2018, which is also the due date for reporting if the account was identified as reportable. Such an account will be treated as having been a Reportable Account on 1 July 2017 if subsequent due diligence identifies that the account would have been a Reportable Account on that day. If it is a Reportable Account it must be reported by 31 July 2018, regardless of whether the Reporting Financial Institution conducts its due diligence procedures on the account between 1 July 2017 to 31 December 2017 or 1 January 2018 to 31 July 2018.

    5.11 Recalcitrant account holders – FATCA

    In the case of:

    • a New Individual or Entity Account that was opened in spite of the requirement to obtain a self-certification upon account opening, or
    • a New Individual Account that was appropriately opened but it has subsequently needed to obtain a self-certification (for example, due to the balance of the account exceeding a threshold),

    an account holder that is uncooperative in providing the self-certification on request may become a 'recalcitrant account holder' under the FATCA Agreement.

    A recalcitrant account holder, as defined in section 1471(d)(6) of the U.S. Internal Revenue Code, means an account holder who fails to comply with reasonable requests to provide information needed to determine if the account is a U.S. reportable account. In the case of an account that was determined to be a U.S. reportable account, a recalcitrant account holder means an account holder that fails to provide information needed for reporting. An account held by a recalcitrant account holder will be a recalcitrant account as described in Article 4.2 of the FATCA Agreement.

    The Reporting AFI will not be required by the U.S. to withhold tax under sections 1471 or 1472 of the U.S. Internal Revenue Code or to close the account, as long as the U.S. Internal Revenue Service receives from the AFI (through the ATO) the information on the account as set forth in subparagraph (a) of Article 2.2 of the FATCA Agreement. There is no Account Holder type in the FATCA XML schema for a recalcitrant account holder. Instead, the RFI would report the account as, or as if it were a U.S. Reportable Account. (In certain circumstances outlined in paragraphs 1(d) and 1(e) of Article 4 of the FATCA Agreement, Reporting AFIs that have elected certain withholding responsibilities under the U.S. Internal Revenue Code, that make a payment of or act as intermediaries for a U.S. Withholdable Payment to any Non-Participating Financial Institution may be required to withhold tax or provide information to an immediate payer of this payment to ensure withholding is applied correctly).

    However, it is noted that where a New Individual or Entity Account was opened in spite of a requirement to obtain a self-certification upon account opening, account reporting under Article 4.2 will not remediate the earlier failure by the Reporting AFI to comply with the due diligence obligations under sections III or V of Annex I of the FATCA Agreement.

    A distinction may be made between an account holder who fails to provide a self-certification required under the FATCA Agreement, and an account holder who fails to provide a self-certification requested by the RFI to 'cure' U.S. indicia or clarify a change in circumstances which suggest the account may be a U.S. Reportable Account. In the latter case, the account holder is not recalcitrant. The account is simply treated as a U.S. Reportable Account.

    Pooled reporting

    Pooled reporting of recalcitrant account holders does not apply under the Australia-U.S. FATCA Agreement (as it is a Model 1 FATCA Intergovernmental Agreement).

    5.12 Payments to Non-Participating Financial Institutions – FATCA only

    Where an RFI makes payments to a Non-Participating Financial Institution (NPFI), it is required to report the name and the aggregate value of all payments made to the Non-Participating Financial Institution for the years 2015 and 2016.

    An NPFI is a Financial Institution that is not FATCA compliant as a result of one of the following scenarios:

    • the Financial Institution is located in a jurisdiction that does not have an intergovernmental agreement with the U.S. and the Financial Institution has not entered into a FATCA agreement with the U.S. that requires direct reporting of information to the IRS, or
    • the IRS classifies the Financial Institution as being an NPFI after the required notification and procedures for significant non-compliance.

    The procedures for significant non-compliance under Australia’s FATCA Agreement with the U.S. provides an 18-month period notice period for the ATO to take enforcement action before an RFI is treated as an NPFI.

    No Australian Financial Institution has or will be an NPFI during the years 2015 and 2016. Reporting of payments to NPFIs for those years is therefore expected to relate to Financial Institutions that have not satisfactorily identified themselves as an Australian Financial Institution or are Financial Institutions located in foreign jurisdictions.

    The payments that are to be reported are:

    • non-US source interest paid on a financial account held by a NPFI
    • non-US source dividends paid on a shareholding held in a  financial account held by a NPFI
    • payments in connection with derivatives that are contingent upon or determined by reference to the payment of interest or dividends from U.S. sources, and
    • non-US source payments, to a NPFI, that are the proceeds or benefits of a Cash Value Insurance Contract or Annuity Contract.

    5.13 Currency reporting and related issues

    Reporting

    Amounts or values reported under the CRS must be reported in the currency the account is denominated and the information reported must identify the currency in which each amount is denominated. Where an account is denominated in more than one currency, the RFI may elect to report information in any of those currencies. Where currencies are converted for reporting amounts, a spot rate from the last day of the calendar year must be used.

    The same rules should be followed for FATCA reporting, except that reporting in U.S. dollars is an additional option (even if the account is not denominated in U.S. dollars).

    Thresholds

    Threshold amounts for the purposes of determining due diligence procedures are in U.S. dollars in the CRS. However, Australia has allowed RFIs to treat all dollar amounts in the CRS as being in Australian dollars, if they choose. Where an account balance or value is converted to either U.S. or Australian dollars for the purpose of testing a CRS threshold, a spot rate on the test date may be used.

    The CRS test date is 30 June 2017 for initial categorisation of pre-existing accounts, or 31 December each year for subsequent testing. For an insurance contract or Annuity Contract, the date of the most recent contract valuation may be used.

    Threshold amounts to determine due diligence procedures are specified in U.S. dollars for FATCA. When converting an account balance or value between another currency and U.S. dollars to test a FATCA threshold, the RFI must use a published spot rate from the last day of the calendar year preceding the year when the balance or value is being determined.

      Last modified: 13 Oct 2016QC 48683