Just Me has been asking to find out whatever I could about “US Persons” in Australia and New Zealand. I have to admit I don’t much about Australian or New Zealand politics but I knew enough to recognize the name Kristina Keneally (who in Canadian terms would be the Australian equivalent of Dalton McGuinty or Mike Harris). I literally though fell off my chair when I discovered that Keneally in fact was born the United States and renounced her US citizenship in 2000 upon becoming Australian (Australia banned dual nationality until April 4th 2002).
Soon after becoming an Australian citizen she ran for the state parliament and was elected eventually becoming a cabinet member and finally premier of the Australian state of New South Wales. I am going to edit this post in the future because just from initial research there some rather interesting fact about the case of Ms. Keneally that I think are quite relevant to what we are discussing. I will also note that given the date of her renounced she would have been subject to the post 1995 exit tax. Did she fill out form 8854?
http://en.wikipedia.org/wiki/Kristina_Keneally
I have to say I really liked the picture I posted, someone who renounces their US citizenship and flies around on private jets–what could be better? Note: the round windows. The plane she was flying on is a Gulfstream which is absolutely top of the line in terms of private jets. I am going to have more on Ms. Keneally a lot more like pictures of every meeting should had with a US politician or government official after she renounced as part of her official duties.
Tim,
I don’t know why I did not think of her. I knew she was born and raised in the States, and speaks with a strong American accent. I guess since she was kicked out of NSW premiership by the voters I had forgotten about her. Wonder what she is up to now. Will have to ask my brother-in-law. Thanks for drawing that to my attention to her.
Even prior to 2002 it was possible to be an Australian with dual citizenship, as long as the other citizenship was held before naturalizing as an Australian. However, some elected positions are not available to dual citizens, and in any case most politicians renounce other citzenships to prevent it becoming an election issue.
She actually shows up in the Federal Register, too, though not until January 2003. (I guess State makes sure that politicians always get included in the name & shame list; if they refuse to publish the name, it could cause issues if the opposition wonders why the name never showed up and starts making a big stink out of it).
Well, I renounced my U.S. citizenship in Auckland recently.
@Rick,…
Do tell more, as there are very few Kiwis commenting here, so would be interested in the whys and wherefores of your actions, if you care to share them.
Also, do you know of any expat forums etc in NZ that have any interest in these matters?
Way to go Rick. I renounced last week here in Calgary Alberta. Tell us your story.
Just curious. Is it true that Dual Citizens in Australia don´t have to pay US taxes on their pensions (australian social security)?
@Markpinetree: Under the provisions of Art. 18 of the US-Australia treaty it would appear that US citizens are not subject to US tax on Australian pensions to which tax has been paid to the Government of Australia. Here is the link:
http://www.irs.gov/pub/irs-trty/aus.pdf.
Copies of all US tax treaties with foreign governments are available on this same website.
The provisions of these various treaties are not uniform so the treaty with the country where you live or from which you receive a pension or social security benefits has to be checked to determine how it affects you. The US and Brazil do not have a tax treaty – only an information exchange treaty.
I just realized there was a typo error in my email address with my just submitted reply, so I am sending this with my corrected address.
I know…I am learning this. Americans Abroad don´t get the same treatment and yet we are all Americans Abroad. I have a small pension from working and paying social security in Brazil. Acording to Brazilian laws I don´t pay taxes on this income. But when dealing with the IRS I have to pay. I believe that Americans in France also don´t pay taxes to the USA in their pensions. And perhaps in England; Bad luck. The same for self employment social security tax. Since Brazil has no treaty with the USA… I end up having to pay it in both countries. This is making it impossible to be self employed in Brazil.
@everyone
My initial impression was that at least in the view of the US Embassy in Canberra any US citizen who naturalised as an Australian citizen prior to April 4th 2002 was deemed to have reliquished their US citizenship. I am ready be corrected on this point but I have read several places that this is the case.
@ Tim. I renounced in late 2010 and I’m still waiting for my Gulfstream. To whom do I get to complain? 🙂
@markpinetree
Regarding Australia… Look at the date on the agreement. 1983. Since that time, Australia as encouraged a BIG move from a social security type payment (pension they call it and it is now means tested) to a 401K like structure called a “Superannuation” system. I am not sure of the status of these programs under that agreement and whether or not these “Superannuation” payments would be considered tax free.
If you are resident in NZ, and are receiving social security benefits from the States, you are taxed on them in New Zealand, and a Kiwi living in the US would not escape taxes on their (pension) from New Zealand.
Again, as Roger says, it all depends on the specific tax treaties between countries.
If you go to the IRS tax treaty website and click on Australia you will find there are some additional US-Australia tax treaty agreements with later dates.I have not had time to open or read them but possibily they reflect these Australina pension changes.
Usually these treaties serve mostly to prevent US citizens from excaping US taxation, but occasionally they do provide some benefits to US citizens that otherwise they would not have.
But these tax treaties are not foolproof. The treaty with Venezuela, for example, like all others recognizes the right of the US to tax the income of US citizens resident in that country. But there is no guarantee by Venezuela that it will allow US citizens there to exchange their local currency for US dollars to make payment to the IRS. And right now they cannot do that. The strict currency exchange controls in Venezuela do not permit currency conversion into dollars for this purpose. Americans there, in order to obtain dollars, must buy them on the black market and smuggle them out of the country to pay the IRS. If they get caught, they can lose everything they own there and spend many years in prison.
@Just Me
Basically, I have no interest in ever returning to the United States and the compliance issues are way to complicated to keep up with if you have no intention of ever going back to the United States.
The process itself was pretty simple, I called, a consular officer called me back within a week or two (guess he was out of town), read me a list of questions that I answered, his staff called me back the next day to schedule an appointment to renounce that was set for the next week, they sent me a package of paper work to bring with me, when I showed up I paid my $585/NZD renunciation fee took a few oaths that I understood what I was doing and was out in less than 45 minutes.
@Rick…
I certainly can understand that. I am not there “yet”. There are a lot of Canadians here that are right there with you though, so have a full appreciation of their positions and why they are doing what they are doing.
I wonder if you have left any money or assets like IRAs or 401ks back in the States or have you moved everything to NZ. Their foreign tax rules certainly make that a viable consideration with the “fair dividend” tax rate was hard for me to comprehend, and then the FX exchange exposure for non realized gains (although with the every shrinking US dollarette, that impact is somewhat in your favor these days if you just have US bank/cash accounts left in the States.)
Not sure how long you have been in kiwiland, so just wondering. Also, just for my curiosity, what age range are you? Has US social security factored into your decision.
Thanks for any other details you can share. I am sure others besides me are curious, as we do learn from each others experiences…
Thanks much
@Just Me
FX exchange exposure is huge for U.S. persons living in New Zealand for the last couple of years as they have potential reportable gains against the USD, my understanding from my U.S. CPA is that if I wanted to be fully compliant I would need to track the gain/loss on each purchase I make in NZD and track back the value of that NZD when I purchased/earned it.
It’s just to much to deal with, I just want a clean break, I’ve been fully compliant with FBAR and my U.S. tax returns so figure it’s a good time to get divorced from the U.S. as I do not know what the renunciation rules will be in the future or if it will even be possible as congress could just defund that function in the consulates as they have the ability to do so.
I personally think the banks in New Zealand will likely close accounts of U.S. persons in the next year or two (it’s just to small of a group to deal with), I also managed to save a bank account from being closed in Switzerland by renouncing my U.S. citizenship that I’ve had for years and always reported with FBAR which I sent a copy of to the bank every year but that wasn’t going to be enough to save the account.
It also seems I may not have to file the dreaded FATCA form as I’m no longer a U.S. citizen. — http://tiny.cc/1oi6aw
I’m a covered expatriate under 877A so that’s going to be a fun process, with a small business and one personal bank account still open in the states, have plans to go into business outside the U.S. with business partners who refused to have a U.S. citizen as a partner because of the reporting requirements back to the U.S..
I’ll be moving my small U.S. business this year to some other country as it’s an online business and can be run from anywhere.
I’m in my mid 40’s, don’t plan on collecting my social security, and hope to never have anything to do with the U.S. after my 2012 U.S. tax return is completed (but I fully expect to get audited).
I saw this train wreck coming around 2005 and started getting ready, really it’s a pretty sad day that U.S. citizens would rather give up their citizenship than deal with the U.S. government anymore, but just because a country may have been great once doesn’t mean it will again.
Sorry if any of this doesn’t make sense I have a bit of ADD and Dyslexia.
@Rick…
It is sad, I agree. Most of what you say makes a hellva a lot of sense. Thanks for sharing. I think it is the US Congress that has ADD and Dyslexia. I have Post Compliance Trauma Stress Disorder (PCTSD), as a result. 🙂
Assume you must have Kiwi Citizenship.
I wished was as smart as you in 2005, but I was still in my blissful ignorance phase probably left over from my sailing days, when none of this seemed to impact you or be of any concern. Although, I guess I should have had a clue that the US government was bearing down, when I pulled into remote Pacific island harbors, and the little Customer Officer rowed out in his dugout Canoe and wanted you to fill out the US Customs Small Vessel Report so he could fax it to Honolulu. I had a hint then that there was no escaping the US surveillance of my activities! I loved the French in New Caledonia, as they just refused to do it, but Custom’s in Australia, like the US, never met a form that they didn’t love!
Also still interested if you have an answer to this question…
Do you know of any US expat forums etc in NZ that have any interest in these matters?
One other… Do you have any journalist contacts or suggestions on who you might contact to get this story into the NZ media? I am trying to find a sympathetic ear, and not just send unsolicited emails.
Thanks again. It helps hearing your story.
@RogerConklin
A couple of things to remember Roger. One is the US unlike almost all other countries uses its own model treaty(which allows it to uniquely tax its citizens among other things). Second the US actually has relatively few tax treaties compared to most other industrialized countries. In fact in Central and South America the US only has treaties with Mexico and Venezuela. Third many of the treaties the US DOES have are now quite old. The US Greece and US Pakistan treaties for example have not been updated since the 1950s and are almost completely unrecognizable and out of date.
@Tim, all US tax treaties require the approval of Congress. This is done after they are negotiated and signed, but before they are recognized as valid ;by the US. I suspect the the “hard nosed” conditions of the newer treaties make it more difficult for the US to negotiate these treaties than it does nother countries, none of which tax their citizens whoi are resident of the other country.
I am curious about the old 1950s treaties like Greece: I suspect they do not include the clause granting the right of the US to tax its citizens living in that country. The first legislation taxing US citizens abroad was the Tax Act of 1962, signed by President Kennedy. The Foreign Earned Income exclusion in that first treaty was $35,000 for citizens abroad 3 years or more. Translated into 2012 US dollars, using the CPI – Consumer Price Index, that is equivalent to some $26,000 today. Back then it affected only a handful of very wealthy Ameericans abroat because $35,000 was the salary level of only a very large company CEO. The middle class was not affected by that early legislation, but once the camel’s nose was inside the tent – boy it changed. The big change was in 1976. That was the year the US trade balance was permanently transformed from a surplus into a deficit. I was one of the hundreds of thousands of Americans working abroad at that time who threw in the towel and came home, abandoning US export market domination to our trade competititors who stood in awe, mouths haing open, hardly able to believe how the US would delibertate force is citizens to come back home and abandon this market dominance.
Correction: I left out a digit. $35,000 in 1962 was equivalent to US$266,000 in 2012 dollars.
@Rick
Welcome to your self-imposed exile in our part of the world ;-).
I’m a Kiwi who relinquished my greencard within 1 month of getting out the US. That was a millstone I was happy to shed after the FBAR debacle. Were you born with US citizenship or acquire it?
My spies tell me that NZ banks are intending to comply with FATCA (no choice they say). However, I do have an American spouse and she’ll be getting ejected by our NZ banks over my cold dead body.
Currency control another big headache.
Many of my friends in India have inherited real estate and funds from parents. For the most part, these are non repatriable and hence are subject to currency controll by India. Most are in the difficult situation of unable to get part or most of the funds to the US
@kumar, a question: Are persons with US citizenship resident in India permitted to freetly exchange local currency for US dollars to remit to the IRS in payment of US taxes on income received in India?
@Moby — I agree with you that NZ banks will comply with FATCA but the easiest way to be compliant is not to have any US persons as customers so they simply have nothing to report.
And congratulations on giving up your green card, there was a guy at the consulate in Auckland when I was renouncing who was applying for a green card, I told him he should talk with his accountant or a U.S. accountant about the tax ramifications as there are many.
@Just me — Haven’t run into anyone really interested in these matters, most people don’t believe me when I tell them about the tax matters U.S. persons face.