The ATO advises that the Foreign Account Tax Compliance Act (FATCA) was enacted by the United States Congress in March 2010 to improve compliance with US tax laws. FATCA imposes certain due diligence and reporting obligations on foreign (non-US) financial institutions, including Australian institutions. These institutions will be required to report to the US Internal Revenue Service (IRS) information on US citizens with financial accounts.
On 28 April 2014, Australia and the US signed an intergovernmental agreement to assist in the facilitation of FATCA for Australian financial institutions. A key objective of the intergovernmental agreement is to support Australian compliance with FATCA in a way that reduces its overall burden on Australian business. This includes reporting the information via the ATO under the existing Australia–US tax treaty arrangements.
Legislation to give effect to Australia’s obligations under the intergovernmental agreement received Royal Assent on 30 June 2014 - see Tax Laws Amendment (Implementation of the FATCA Agreement) Act 2014.