Accounts receivable have never been more important than they are right now. Supply chain shortages, a tight labor market, and rising fuel prices all contribute to the soaring costs of business. Companies need to run as efficiently as possible. Governments are no different, with multiple stimulus packages, inflation, and mounting deficits, they rely on tax and penalty collection to fund operation. One of the biggest risks to business is the United States government enforcing their Finance and Taxation Compliance Act (FATCA) in Australia.

FATCA enforcement is not just for banks reporting on US citizens’ accounts. FATCA is much broader, and few understand the risks and need for additional controls to be implemented. Indeed, the unintended consequences of FATCA regulation and non-compliance may be the next unforeseen disruption to Australian business in the short term.

The ATO’s agreement to assist in FATCA enforcement states the agency will serve notices of non-compliance on behalf of FINCEN (Financial Crimes Enforcement Network). However, it will not collect penalties on any other Australian citizen or entity.

FATCA is an annual reporting requirement that tracks assets and accounts of American citizens and green card holders to reduce tax evasion and money laundering, among other offences. Non-compliance is a criminal offence, regardless of ignorance. Financial accounts that are subject to the reporting requirement are any account with a positive balance that is under ownership or control of an American citizen or green card holder, with few exceptions. Control is defined by signatory authority, e.g. the right to wire company funds or use a company debit card. Company accounts may be subject to Foreign Bank Account Report (FBAR) filings due to being under the control of an American, even though the employee does not own the money in the company’s bank account. A minimum penalty for non-compliance is USD$10,000 per account and a maximum of 50% of the balance of each non-compliant account, and a possible (7) seven years jail that would be the company representative’s responsibility, not the employee in control of the company’s funds.

The ATO’s agreement to assist in FATCA enforcement states the agency will serve notices of non-compliance on behalf of FINCEN (Financial Crimes Enforcement Network). However, it will not collect penalties on any Australian citizen or entity. Company funds would be protected from automatic collection, but the debt would remain, and the company’s credit rating may be at risk. This unexpected expense would be an unwelcome surprise. Consulting a cross-border specialist to identify any applicable accounts for a FBAR filing is a simple solution.

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