The Financial Services Council (FSC) has urged the United States government to extend the retirement fund exemption to the Foreign Account Tax Compliance Act (FATCA) to Australian superannuation funds.
"The FSC is of the view that Australia poses an exceptionally low risk of tax evasion by United States account holders," FSC chief executive John Brogden said in a submission to the Internal Revenues Service (IRS), the US taxation office.
The FSC also seeks certain life insurance products to be exempt from the proposed regulations.
"These widely used products provide a low risk of abuse for the purposes of tax avoidance," Brogden said.
FATCA is a set of proposed US regulations that require financial institutions around the world to report account details of US citizens for taxation purposes.
Under the current FATCA proposals, Australian super funds do not classify as retirement funds, largely because of the way our voluntary contribution system is set up.
If super funds are not exempt from the new rules, then they will face a new set of onerous compliance requirements, on top of the current regulatory changes taking place in Australia.
The FSC also urged the US government to allow identification and verification of a customer to be carried out under local laws without the need to undertake costly changes.
The changes would have a very low probability of increasing the chance of identifying a US citizen who wishes to remain hidden from sight of the US tax authorities, Brogden said.
The industry body also argued that Australian wealth management products already require extensive reporting, which would provide sufficient information to help the US government identifying any US citizens who have invested in these structures.
The FSC expressed the hope that the Australian government will enter into an inter-governmental agreement with the US to recognise some of the Australian legal and compliance structures.
"An inter governmental agreement would help from an administrative point of view," FSC policy director Martin Codina told InvestorDaily.
"Institutions would be able to report to the ATO (Australian Taxation Office), rather than the IRS. That would make it easier to report," he said.
Codina was also hopeful the US government will allow Australian super funds to be excluded from the reporting requirements.
"The IRS has said that it doesn't intend to capture genuine pension funds,"Codina said.
Brogden is in Washington and presented at the FATCA public hearing last night.
According to Codina the chief executive's focus would be on the issue of super fund exemption.
The Association of Superannuation Funds of Australia (ASFA) already filed its submission at the end of last month, addressing the issue of retirement definitions.
"ASFA understands that the US Treasury and the IRS are reluctant to provide exemptions on a country by country basis," the association said.
"As such, Treasury and the IRS are looking at a generic exemption which can be applied across all jurisdictions."
"ASFA submits that an additional deemed compliant retirement fund category should be included in the retirement fund deemed compliant category which should also be reflected in the retirement fund exempt beneficial owner category and the financial account exception."
