If you are a tax resident of mainland China and hold bank or investment accounts in Australia or Hong Kong, those institutions are very likely reporting your account balances and income to mainland China’s tax authority each year under the Common Reporting Standard (CRS). Since 2025 the State Taxation Administration (STA) and local tax bureaus have been using that data to ask residents to check and declare overseas income, and some people have been contacted directly. For families with members in Australia, the same system also works in reverse: accounts in mainland China and Hong Kong held by Australian tax residents are reported to the Australian Taxation Office (ATO).
What the Common Reporting Standard is
The CRS is an OECD standard for the automatic exchange of financial account information. Banks, brokers, custodians, certain insurers and many investment entities must identify account holders who are tax resident in another participating jurisdiction and report their accounts to their own tax authority, which sends the information each year to the tax authority of each jurisdiction where the account holder is resident.
Australia, mainland China and Hong Kong SAR all take part. Australia’s CRS obligations began on 1 July 2017 and the ATO received its first exchanges in September 2018. Mainland China has exchanged information every year since 2018. Hong Kong’s arrangement with the mainland took effect in September 2018, with the first exchange later that month.
What is reported for an individual account holder
| About the person | About the account |
|---|
| Name | Account number |
| Residential (or mailing) address | Balance or value at the end of the year (or the fact that it was closed) |
| Date of birth | Deposit accounts: gross interest paid or credited |
| Each jurisdiction of tax residence | Custody (investment) accounts: gross dividends, interest and other income, and gross proceeds from sales or redemptions of financial assets |
| Taxpayer identification number (TIN) for each jurisdiction | Other accounts: gross amounts paid to the holder, such as redemption payments |
Note that gross sale proceeds, not profits, are reported, so the tax authority sees the scale of trading and then asks what the gain was. The report goes to the jurisdiction of residence on the institution’s records, which usually comes from the holder’s own self-certification.
How the information flows
- A Hong Kong bank or broker with an account holder who is tax resident in mainland China reports to the Hong Kong Inland Revenue Department (IRD), which sends the data to the STA.
- An Australian bank, broker or fund with an account holder who is tax resident in mainland China reports to the ATO, which sends the data to the STA.
- A mainland Chinese bank with an account holder who is tax resident in Australia reports to the STA, which sends the data to the ATO. A Hong Kong institution with an Australian-resident account holder reports to the IRD, which sends it to the ATO.
The STA compares what it receives with the person’s Individual Income Tax (IIT) filings; the ATO does the same with Australian returns.
Self-certification: why a person in Australia may still be reported to mainland China
When an account is opened, the institution asks the customer to complete a self-certification of tax residence, listing every jurisdiction in which they are tax resident and the TIN for each. The form is a legal declaration. In Hong Kong, for example, knowingly or recklessly making a misleading self-certification can be an offence.
Tax residence is decided by each country’s own law, not by visa or passport. Under the PRC Individual Income Tax Law, an individual is resident if they have a domicile in mainland China or stay there 183 days or more in a tax year; the implementing regulations describe domicile as habitual residence because of household registration (hukou), family or economic interests. A person who has moved to Australia but keeps a hukou, home, spouse or business in the mainland may still be a PRC tax resident while also being an Australian tax resident.
Where a person is resident in both countries, the self-certification should say so. Many forms on file were completed years ago, before a move, and no longer reflect the facts. Our article on becoming an Australian tax resident explains the Australian tests and the treaty tie-breaker in more detail.
Mainland China’s overseas income checks since 2025
PRC tax residents have long been required to declare foreign-sourced income, but enforcement was limited until recently. Public reporting since 2025 describes a clear shift:
- From around March 2025, tax bureaus in places including Hubei, Shandong, Shanghai and Zhejiang published cases of residents required to pay tax on undeclared overseas income, and residents began receiving app notices, SMS messages and calls asking them to check their overseas income.
- Reports in 2025 indicated that the checks had extended beyond the very wealthy to ordinary investors with overseas share accounts.
- In January 2026 the STA publicly reminded residents to review overseas income received in 2022 to 2024 and to file corrections promptly.
- Local bureaus have continued to publish cases in 2026, including taxpayers who corrected earlier years after a reminder.
The escalation steps local bureaus describe
Official and media reports describe a staged approach, often called a “five-step” method:
| Stage | What typically happens |
|---|
| 1. Reminder | A message through the IIT app, SMS or phone, inviting the person to check overseas income |
| 2. Self-correction under supervision | The bureau asks the person to file a corrected return and pay, or to explain why nothing is owed |
| 3. Interview and warning | A formal meeting with the bureau where the issue has not been resolved |
| 4. Case filing and investigation | A formal tax inspection |
| 5. Public disclosure | Publication of the case |
Even a person who owes nothing should respond with evidence, as ignoring a reminder can lead to escalation.
The typical exposure, as publicly reported
In general terms, and subject to the person’s facts:
- Rate. Interest, dividends and gains on the transfer of property (including shares) are generally taxed at 20% IIT. Overseas employment and business income are taxed under different rules.
- Timing. Foreign-sourced income must be declared between 1 March and 30 June of the year after it is received.
- Late-payment surcharge. Under the Tax Collection Administration Law, unpaid tax attracts a surcharge of 0.05% per day, running from the day after the filing deadline.
- Past years. Unpaid tax arising from failure to file or miscalculation can generally be pursued for three years, and up to five in special circumstances. There is no time limit where the conduct is treated as tax evasion.
- Penalties. Where under-declaration is established after an investigation, a fine of between 50% and five times the unpaid tax can be imposed, and serious cases may be referred for criminal investigation.
- Foreign tax credit. Income tax actually paid overseas on the same income can generally be credited, up to the PRC tax on that income. Because Hong Kong generally does not tax dividends or share gains, there is often little foreign tax to credit on a Hong Kong investment account.
Reports also indicate that, for overseas share trading, gains and losses within the same year have generally been netted in practice, but not across years. This, and the treatment of particular products, should be confirmed with a PRC tax adviser.
Why correcting before contact matters
In reported self-correction cases, people who corrected their filings voluntarily or promptly after a reminder have generally paid the unpaid tax and the late-payment surcharge, with administrative penalties reduced or not imposed. The surcharge itself is usually still payable, because it accrues from the original deadline regardless of when the correction is made. The position is much less favourable once a matter reaches interview or investigation. Treatment of an individual case cannot be predicted and should be checked with a PRC tax adviser before filing.
The Australian system follows a similar logic. Under the ATO’s published approach, a voluntary disclosure made before the ATO notifies an examination can reduce certain penalties by 80%, and a much smaller reduction may be available after notification. Shortfall interest may still apply, although the ATO can reduce it in some unprompted cases.
A typical situation
Consider a typical situation, presented as an illustration only. A woman in her sixties lives in Shanghai, where she has her hukou and her home. Some years ago she opened a Hong Kong brokerage account and built a portfolio of Hong Kong-listed shares, receiving dividends and trading occasionally. When she opened the account she certified that she was tax resident in mainland China and gave her resident identity card number as her TIN. She has never declared the dividends or trading gains in mainland China, believing that, because Hong Kong does not tax them, nothing was owed. Her son lives in Melbourne and is an Australian tax resident.
Each year the broker reports her year-end balance, dividends and gross sale proceeds to the IRD, which passes them to the STA. In 2025 she receives a message in the IIT app inviting her to check her overseas income, followed by a call from her local bureau. Her son asks whether he should send the broker statements to the bureau himself.
The better course is to get advice first. A PRC tax adviser would typically work through each year’s statements, establish the dividends and net gains, check for any foreign tax withheld, and prepare a corrected filing and explanation, so the response is complete the first time. If the son holds joint accounts with his mother, acts under her power of attorney or expects to receive money from the account, his Australian position should be reviewed at the same time.
The Australian angle
People who have moved to Australia but remain PRC residents
Australian residents are taxed on worldwide income, so a person settled in Melbourne who still has a mainland domicile may have obligations in both places on the same investment income. The Australia–China tax treaty (the 1988 Agreement and its protocols) has tie-breaker rules for individuals resident in both countries, looking at matters such as where the person has a permanent home and where their personal and economic ties are closer. Applying them needs advice in both countries, and the treaty does not itself change what a bank reports under the CRS.
A person who is cancelling their hukou on emigration should also be aware that the PRC IIT Law requires tax clearance before the household registration is cancelled.
Australian residents with accounts in mainland China or Hong Kong
Mainland deposit interest, mainland rent, Hong Kong dividends and gains on overseas assets are generally assessable to an Australian tax resident. Temporary residents are generally exempt on most foreign income, but that status depends on visa type and the person’s spouse. The ATO receives CRS data from many jurisdictions, matches it against returns and has repeatedly identified undeclared foreign income as a focus.
Where foreign income has been left out, an amended return can usually be lodged. The standard amendment period for most individuals is two years, and four years for some, but there is no time limit where there has been fraud or evasion. Where tax has been paid in mainland China on the same income, a foreign income tax offset (FITO) may be available in Australia, subject to limits and to the tax having actually been paid. The order of a PRC correction and an Australian amendment can affect the offset, so both should be planned together. Gifts and inheritances are generally not income in Australia, although banks may still ask for evidence of the source of funds; our article on inheritance from overseas covers that in more detail.
Trusts and companies are reported too
Where an account is held by a trust, company or foundation that is a “passive” entity (broadly, one earning mainly investment income), the institution must also report its controlling persons, such as settlors, trustees, protectors, beneficiaries and those who control a company. A trust that is itself a financial institution reports its own settlors and beneficiaries. A Hong Kong holding company or offshore family trust therefore does not keep the underlying people out of the exchange. Mainland China has also been developing specific rules on the IIT treatment of offshore trust distributions, discussed in our article on China’s new offshore trust tax rules. For how Australia taxes its residents who are connected with foreign trusts and companies, see Foreign Trusts and Offshore Companies: How Australia Taxes Its Residents.
Practical steps
- Map every account. List each bank, brokerage, fund, insurance, trust and company account held by each family member in Australia, mainland China, Hong Kong and elsewhere, including joint accounts and those operated under a power of attorney.
- Confirm residence in each country. Confirm each person’s tax residence under PRC and Australian law, and whether the treaty tie-breaker applies.
- Align the self-certifications. Check that each institution holds a current, accurate self-certification, and update it when circumstances change.
- Review past years. Compare what was declared in each country with the account statements, starting with the years most likely to be reviewed.
- Get coordinated advice before responding to any notice. A response to one tax authority can affect the position with the other. Speak to a qualified PRC tax adviser and an Australian accountant before replying, sending documents or filing a correction.
- Look ahead. Hong Kong and other jurisdictions are moving to an updated CRS and a parallel framework for crypto-assets in the coming years; structures and Wills should be reviewed with that in mind.
Common mistakes
- Assuming that income that is tax-free in Hong Kong is also tax-free for a mainland resident.
- Assuming that moving to Australia ends PRC tax residence while a hukou, home or family remains in the mainland.
- Leaving old self-certifications in place after a move, or listing only one country when the person is resident in two.
- Ignoring an IIT app reminder because nothing is believed to be owed.
- Correcting in one country without considering the other.
- Relying on intermediaries who claim overseas income cannot be detected.
How we can assist
We advise on the Australian legal side of cross-border family arrangements, including Wills, estate structures, trusts and moving family wealth into Australia. We do not give PRC tax advice; we work alongside tax advisers in mainland China and Hong Kong and Australian accountants so that the steps taken in each country are consistent. Our article on structuring wealth for Asian families with Australian ties discusses the wider planning picture.
Related reading
Chua Tan Associates acts for families and their professional advisers on Australian legal matters with a cross-border dimension, working alongside tax advisers in Australia, mainland China and Hong Kong. To arrange a confidential consultation, please contact our Melbourne office on +61 3 9602 3988 or submit an enquiry. Advice is available in English, Mandarin and Cantonese.
Justin Chua (蔡智勋), lawyer and mediator, Chua Tan Associates, Melbourne. General information only, not legal or tax advice.
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