The Australian government is exploring the feasibility of an agreement with the United States based on the model reciprocal agreement issued in July by the U.S. Department of Treasury for implementation of FATCA (the Foreign Account Tax Compliance Act). Under the agreement, Australian financial institutions would be able to implement the due diligence and reporting compliance required by FATCA through the Australian Treasury.
The model reciprocal agreement offered by the U.S. permits foreign financial institutions to report certain financial account information concerning U.S. account holders to the tax authorities of the foreign countries, instead of disclosing, reporting and withholding in a direct relationship to the U.S. Internal Revenue Service. The foreign tax authorities would then automatically exchange the information under existing bilateral tax treaties or tax information exchange agreements with the U.S. To reciprocate, the United States would pursue the adoption of regulations, and advocacy of relevant legislation, to achieve equivalent levels of automatic exchange of information with the foreign country. A country signing the reciprocal agreement would be a “FATCA Partner.” “Reporting FATCA Partner Financial Institutions” would be treated as complying with, and not subject to withholding under, Internal Revenue Code section 1471 (FATCA).
France, Germany, Italy, Spain and the United Kingdom have already endorsed the model agreement. As part of its study of the agreement, the Australian Treasury is accepting comments on the model reciprocal intergovernmental agreement, through September 28, 2012.