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The Australian Taxation Office has released a guide for businesses on how to conduct a self-review of governance, due diligence, data and reporting systems.
The guide covers what is required for the automatic exchange of financial information (AEOI) framework for which the ATO is responsible in regard to data collection and exchanges with foreign jurisdictions in relation to Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS).
For the purposes of the guide reporting financial institutions (RFIs) are required to have procedures and systems in place to ensure that:
The international agreements to which Australia is a party expect the ATO, as the competent authority, to ensure that RFIs provide complete and accurate information for exchange with those jurisdictions.
The AEOI self-review guide and toolkit provides practical information for RFIs on how to conduct a self-review of their “AEOI framework”. It outlines three core elements and areas of compliance:
The ATO said a well-designed AEOI framework should provide a clear line of sight for the maintenance, reporting and compliance with your AEOI obligations; offer insights as to what your AEOI operating model looks like and what controls you have in place, including your compliance program for due diligence obligations; help identify potential systems and process gaps that may prevent reporting errors in advance and reduce incidence of misreporting; and assist senior management with clarifying accountabilities for managing AEOI obligations, and any associated risks and issues.
It should also provide accurate reporting of your customers’ information.
For more information see automatic exchange of information guidance – CRS and FATCA.
The new guide can be used to prepare for an AEOI review if you are an Australian reporting financial institution (RFI); review the design and operation of your AEOI framework as part of your AEOI obligations; undertake a review of your AEOI reporting systems and data testing to ensure your business systems are accurately recording and reporting information for AEOI purposes.
For more information refer to Common Reporting Standard – information for tax agents.
The ATO said when it undertakes an AEOI review, it will evaluate an institution’s compliance with the AEOI obligations by obtaining objective evidence of its AEOI framework. The ATO will look for evidence in the form of policies and procedures demonstrating the existence and design of the AEOI framework.
It will apply the following staged rating system:
Operating as required
There is evidence to demonstrate that an AEOI framework is in place, has been designed effectively and is operating as required in practice.
Operating in part (requires improvement)
There is evidence to demonstrate that an AEOI framework is in place and has been designed effectively, but one or more core elements require improvements for the AEOI framework to be fully operational as required.
Not operating as required, or not in place
There is insufficient evidence to demonstrate an AEOI framework is in place or there is evidence to demonstrate an AEOI framework is in place, but significant concerns exist that information is not accurately recorded and reported to the ATO, or a significant number of core elements require improvements both in terms of design and operational effectiveness.
If the ATO has completed the AEOI review and found no major deficiencies in the AEOI framework, it is intended that it may initiate the next review on a periodic basis at least once every four years.
During the intervening period (three years), reporters are expected to proactively monitor their AEOI framework. They must act on any major reporting errors by preparing remediation plans or lodging amended reports (or both) where appropriate.