FATCA may cause legal strife for super funds
Financial institutions could breach Australia's Privacy Act in complying with the US's proposed Foreign Account Tax Compliance Act (FATCA), the Association of Superannuation Funds of Australia (ASFA) has warned.
ASFA said foreign financial institutions (FFIs) in the US faced a conundrum: non-compliance with FATCA could result in significant financial penalties, but they could only be avoided through providing information which may breach Australia's Privacy Act.
The industry body has called for the urgent implementation of an inter-governmental agreement (IGA) between Australia and the US after repeated submissions and suggestions to the US Treasury and the US Inland Revenue Service (IRS) had failed to resolve the agreed exemption of Australian superannuation funds in recent drafts.
It said a US/Australia IGA would exempt superannuation funds from the FACTA regime, which could overcome the industry's privacy concerns about giving personal information to foreign tax bodies. It would enable relevant data to be passed through the Australian Taxation Office to the IRS, ASFA said.
But ASFA said the costs should not be passed on to super funds.
"As the clear intention of all parties is that regulated Australian superannuation entities be treated as deemed-compliant and thus exempted from FATCA reporting requirements, ASFA does not anticipate, and would strongly argue against, any of the Government's administration costs being attributable to superannuation entities," it said.
Early implementation of an IGA was necessary to ensure foreign financial institutions were exempt from the FATCA regime and did not face a 30 per cent withholding on any receipts of US source income, according to ASFA.
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