Q My family migrated to Australia in the 1970’s.  Mum and Dad inherited property in Lebanon from my (deceased) grandmother in 1996.  The property has been rented out for a nominal amount to family and we consider it the family home that we would like to retain for future generations. I have no idea what the property is worth but would estimate at least US$400,000  My parents have never declared that they own any foreign assets.  I am worried about the consequences both now and into the future.

A Regardless of whether the property generates nominal rent or not, it is a legal requirement that you annually declare an interest in foreign assets worth greater than $50,000 on your tax return (2014 Tax Return question 20 sect P). If your parents are on Centrelink benefits such as the Age Pension, they are also required to notify Centrelink of the property’s asset value and the income generated.

The property is assessable by Centrelink and subject to the Income and Assets Test.  Having spoken to Centrelink, they have stated that provided your parents declare the value of the assets now, they will not have their previous entitlements re assessed.  Future entitlements will however be subject to their revised declaration. If they do nothing, they run the risk of Centrelink identifying the non-disclosure and seeking reimbursement for overpayment of benefits.  If your parents elect to pass title of the property to you now, the property will be deemed as “gifted” and will be subject to the their Assets test for 5 years.

If they do not declare foreign sourced income or assets and the ATO subsequently identifies the assets, there can be substantial tax penalties (up to 90%) and the chance of criminal prosecution.

The ATO has offered Tax payers until 19 December  2014 with an opportunity to declare previously undeclared offshore income and assets without incurring significant financial and criminal penalties that may otherwise arise.  Project “Do It”  is a tax amnesty that limits the back taxes payable on foreign sourced income to 4 income years and caps the penalty to 10% on the tax owing.  If back income is less than $20,000, there is no shortfall penalty for that year.  The General Interest charge will still apply.

This problem cannot be ignored and will not go away. Non or false disclosure could result in action by both the ATO and Centrelink. It is also really important to disclose this property asset so that you have a clear understanding of the property’s tax status for your parent’s future Estate Planning.

Anyone who has offshore bank accounts, property or other foreign domiciled assets or income should look at taking up the amnesty offer from the ATO.  With 1 in every 4 Australians not born in Australia, there is considerable likelihood that individuals own assets offshore that have not been declared to Australian authorities.  With modern technology and greater co-operation between international tax authorities, there is a greater chance of foreign assets or income being identified.

Contact the ATO and lodge an expression of interest in making a declaration.  Further information can be found at www.ato.gov.au/projectdoit or contact 1300 132 346.  For Centrelink assistance visit www.humanservices.gov.au or contact 132 300.

Follow Andrew on Twitter @AndrewHeavenFP.  This article was originally published in The Australian.