Australia and the United States have on Monday signed an intergovernmental agreement (IGA) to reduce the burden on Australian financial institutions in complying with the United States' Foreign Account Tax Compliance Act (FATCA), the Australian Treasurer Joe Hockey announced in a press release.
FATCA is an information-reporting regime that was enacted by the United States in March 2010. It will commence on July 1, 2014 and will affect a large part of the Australian financial services sector.
The conclusion of this treaty-status IGA will help Australian financial institutions comply with FATCA.
"It reduces the overall burden on Australian business, minimizes costs by simplifying due diligence requirements and broadens arrangements between the Australian Tax Office and the U. S. Internal Revenue Service," Hockey said.
The IGA will also improve existing tax information-sharing arrangements between Australia and the United States, for the purpose of preventing tax evasion. This will help to enhance the integrity of both countries' tax systems.
Hockey said the Australian government will introduce legislation to give effect to the IGA as soon as practicable.
Public consultation will immediately commence on the draft legislation and its explanatory memorandum