FATCA and Australia – Part 1 of 2

1,187 thoughts on “FATCA and Australia – Part 1 of 2”

1. @Alby – thanks for the clarification, plus the extra scary addition for Halloween. 🙂

2. @Alby
   Yep…and the witch hunt continues!! It’s a nightmare alright!!

3. @All, @Alby

   Has anyone contacted Andrew Hastie MP (liberal member for canning) about FATCA as he would be directly affected by FATCA and CBT as his wife was born in the US and his child is most likely a US citizen.

   From the Sydney morning Herald
   Hastie, looking like a young US presidential candidate, delivered a superbly rehearsed speech, vehemently defending his record, speaking of his American-born wife Ruth and their newborn baby and adroitly contrasting his service to his country with somebody who had lived behind a desk “pushing paper”.

   http://www.smh.com.au/federal-politics/political-news/canning-byelection-candidate-andrew-hastie-holds-tony-abbotts-political-future-in-his-hands-20150908-gjhris.html

4. Looking good

5. @Alby

   “Here’s some cheerful IRS news that will keep @Sleepless awake at night

   http://taxcontroversywatch.com/2015/10/16/internal-revenue-service-issues-stern-warning-to-non-compliant-taxpayers-with-offshore-holdings/#comments…”

   Wish we could read this without a subscription…and I’m getting a bit fed up with signing into things w/Google or FB– the “do you allow WSJ to view your email addresses, manage your calendars, etc”. Why should WSJ need to access that to read a letter to the editor?

   Oh well

6. @Jane
   That is odd, I am able to open the site without subscription. Try this link to the actual IRS happy news:

   http://content.govdelivery.com/accounts/USIRS/bulletins/11fe126?reqfrom=share

   Also with the subscription WSJ articles, I have been copying the heading of the articles and pasting in google search bar and it brings articles up.
   You can then click on the link and can read the full article without subscription.
   Dont know how but that works.
   I wish i could work out Twittering and Tweeting like JC + Jakdac,
   I just stare at the screen blankly….. like a twit

7. @AU
   We figured best strategy is to develop the relationship with the MP that is in our electorate, as they are bound to serve their constituents meaning either voters or residents of their district.
   Good angle though

8. To: The Honorable and Independent Senator Nick Xenophon

   I seek your attention to resolve unjustifiable gaps in The US – Australian Tax Treaty that permit US double taxation of Australian residents as if they live in the US.

   Australian Residents, who are US persons, and their Australian only family members, are impacted by Australian law obligating them to comply with 74,000+ pages of the US Tax Code. This is on top of Australian tax code requirements. Often tax breaks in one country are cancelled by the other country.

   An estimated 77,000+ US persons live in Australia based on census data. Approximately 54% have Australian citizenship. Many have never had a US passport.

   The Extraterritorial US tax and compliance requirement of Australians under US “Citizenship Based Taxation” is not justified. It is wrong. America has forgotten a core founding principle of ‘no taxation without representation.’ Australia should not acquiesce, especially where US law infringes on Australian Sovereignty, and where generally Australians would not accept taxation without representation or services.

   A basis of taxation is services in exchange. Australian residents pay taxes to and receive government services from the Australian government. Australian residents do not receive services from the US Government such as education, unemployment, disability, roads etc. Thus the taxation including what has been called “formageddon” compliance is unjustified and unfair. Some have gone as far as to call the practice a form of ‘indentured servitude’ or ‘financial slavery.’

   For Australian tax residents who are also nationals from other countries (England, New Zealand, South Africa, etc.) Australian law does not oblige these persons to pay tax to those countries on Australian earnings, assets, and income.

   You may ask how are these Australians who are US persons double taxed? The ATO says on their website that “tax treaties prevent double taxation.”

   In a recent high profile case the US Internal Revenue Service (IRS) chased London Mayor Boris Johnson for around 100,000 pounds capital gains tax (in USD) on the sale of his first home in England. Such gains are not taxable in the UK or Australia. Yet gains above $US250,000 on personal home sales are taxable in the US. Boris Johnson lived in the US only his first five years and gained his wealth for toil in the UK. Boris Johnson called the US extraterritorial tax “outrageous.”

   This story of Patricia Moon, a Canadian with clinging US Nationality, was reported in The Wall Street Journal. The same laws apply in Australia. Patricia Moon lived in Canada for decades with her Canadian only bread-winner husband. In the previous three years she made no more than $11,000 in any one year, paid all her Canadian tax, owed no US tax, yet she figured she could be up for $US455,000 in fines for not filing US returns and reporting her joint bank accounts to the US. She was in a state of “terror” and suffered sleepless nights. There are Australian ‘Patricia Moons.’ Some are fearful that if they do not comply they will not be able to visit relatives in the US.

   As reported in the New York Times, in an article titled An American Tax Nightmare: “An American couple, living in Australia for many years, received notice that the merchant banking account for their chain of retail stores was to be cancelled, as Fatca reporting demands overwhelmed their bank’s capabilities.”

   Home sales, report bank accounts what else? Superannuation accounts of Australian residents are considered “nonqualified pension funds” under US law. Any tax that the US has but not Australia does not get ‘prevented’ by the tax treaty. The US need only call a tax by a different name than Australia for it to flow through without tax credits allowed against Australian tax liability.

   Most US tax laws have been in place for decades but have largely been unenforceable until now. Recently Australia adopted a FATCA IGA making Australian law the reporting of Australian resident US person financial account details to the ATO which reports them to the US IRS.

   While there is recognition among members of Parliament that Australian residents will be impacted by the combination of FATCA and US Citizenship Based Taxation, there is a belief among some US persons that members of Parliament don’t know what this really means, and that Parliament should find out.

   Most US persons living in Australia have no idea about US tax compliance and double taxation as they believe some or all of the following: that no one told them, it does not make sense to them, that they are exempt as they are Australian Citizens/Australian Permanent Residents/they were born in Australia, that they live in a relatively high tax country (Australia), they believe the tax treaty will protect them, they think they don’t make enough, or they don’t have any money or income in the US. Others don’t comply because they can not afford the cost which may run into the thousands each year for a simple US return even if no tax is owed.

   Here is a key point: The US AND Australian governments have done very little to inform Australians who are US persons of their US tax obligations under Australian law. Even the ATO website states that tax treaties “prevent double taxation.” With no other explanation. To many people these words may mean you pay all your Australian tax then you need not pay any more tax to the US. It is much more complex.

   The Australian government ought to ensure that tax obligations are fair and non-discriminatory. The government ought to provide crystal clarity as to tax obligations of Australians. And importantly, The Australian Government should not put the government’s “head in the sand” on the issue.

   Via the FATCA IGA, Australia will help a foreign government (US) enforce foreign extraterritorial law against Australians living in Australia. To make way for FATCA, Australia rewrote privacy law to make exception for international treaty – FATCA. Discrimination law is yet to be tested – where Australians who are US persons are being singled out for account reporting and extra tax and compliance obligations. Also, FATCA violates the privacy of Australian only family members (think husband / wife) when the ATO reports to the US joint account information. Additionally the financial security of these Australian only family members is undermined by the additional US tax and compliance obligations.

   Some say just renounce US citizenship. The US makes renunciation of US citizenship complex and expensive and a substantial barrier; one person has called it a “horrendous cost to comply and/or extricate out of US.”

   For no other group of Australians does Australian law (tax treaty) oblige consideration of renouncing a second citizenship. Why has Australia given over its sovereignty to the United States on this matter of tax and compliance – to the extreme harm of its own law abiding citizens and residents? Why has Australia not treated this group of Australians as equal without discrimination due to birthplace?

   Some may point to the upcoming Common Reporting Standard (CRS) and say that Australia will in future report financial accounts for nationals of many countries. A key difference is that all the CRS countries practice Residency Based Taxation while the US practices Citizenship Based Taxation. The CRS requires reporting accounts of non-resident nationals of other countries to those countries – leaving FATCA a threat to US persons and CRS not a threat. The US has not signed up for CRS.

   Equal and privileged Australian citizenship, backed by Australian law, would remove without any doubt the ambiguity of the tax treaty under which the US wants to (ambiguously) claim persons for tax purposes with total disregard for Australian citizenship and residency in Australia.

   Tax Treaty gaps set Australian families with a US Person family member at a disadvantage compared to the Australian only household next door. Or perhaps the next household has members from any of a variety of nonUS countries. Think of it. These other Australians may enjoy security of financial planning including savings in superannuation and tax free home sales, etc. where the Australian household (with US person) does not have this relative security and clarity.

   Where is the fair go for these people who call Australia home? Why doesn’t the Australian government protect these Australians on Australian soil from the “intervention into Australian internal affairs” represented by US tax and compliance laws? Worse yet, why does Australia and the ATO mislead these people and Parliament that the Australian-US Tax Treaty “prevents double taxation?”

   I seek your assistance in the following ways:

   1) Initiate a Parliamentary Inquiry into Australian – US Tax Treaty Tax Treaty gaps that disadvantage Australians who are also US persons in their family financial security, employment, retirement, estate planning, and free time required for the compliance compared to all other Australians – in an unequal and discriminatory manner and without regard to the Australian “Fair Go.”

   2) Request the ATO to report to Parliament on: Australia – US Tax Treaty Gaps impacting Australian tax residents, with examples of finances/tax liabilities for different types of individuals: Single, married with Australian only spouse, with Australian only children, born in Australia but as a US person, disabled person, early in career, late in career, different income brackets, and retired. Such reporting should have been included in the FATCA IGA Impact Statement.

   3) Request the ATO to amend their misleading website information. Such information may have mislead Parliament in its adoption of the tax treaty as “all good” when no it does not completely prevent double taxation as stated but guarantees double taxation. Suggested website change to include the following footnote:

   a. In the case of the Australian-US Tax Treaty while the treaty alleviates double taxation, some forms of double taxation are guaranteed through tax treaty gaps. The US is unique among OECD countries in its taxation of US Persons (citizens and Greencard holders) wherever they live in the world on their global income and assets, as if they are resident in the US, obliging them to comply with the 74,000+ page US tax code. Often US tax law is at odds with the Australian tax code with tax breaks in one country cancelled by the tax code of the other country. The Australian Government has not provided additional protections for Australian Citizens and Australian Permanent Residents against what is called “US Citizenship Based Taxation.”

   Australian Citizens and Permanent Residents who are US persons may be subject to additional US tax, substantial compliance, and potential substantial penalties beyond all taxes, compliance, and penalties required by Australia.

   Generally, above the Australian tax free threshold, there is no additional US tax on earnings and interest as Australian tax rates in these categories are higher than US rates. Yet for categories where Australian taxes are higher than US taxes such as on earnings and interest, no tax credits from these types of taxes paid to Australia, on the excess of Australian tax paid above the US rates, are allowed by the tax treaty against other categories of taxes where US rates are higher than or in addition to Australian taxes.

   Depending on the individual circumstances extra US tax may include on sale of the family home for gains over $US250,000, Superannuation accounts which under US tax law are considered “non-qualified pension funds”, Obamacare NIIT 3.8% investment tax, investment gains impacted by currency fluctuations between the Australian and US dollars, lower tax free threshold in America than in Australia, disregard of Australian dividend franking credits, and any other tax, higher tax rate, or tax under a different name that the US has but not Australia.

   Even if no US tax is owed, an Australian resident has no money or income in the US, and if they receive $0 in US government services, the US may still require US tax returns and reporting of all financial accounts.

   The US tax code treats any account or asset in Australia as “foreign,” with suspicion of tax evasion, involving extra reporting, tax, restrictions, and punitive compliance penalties.

   Australian financial account reporting is in US Dollars to the US Financial Crimes Enforcement Network, any Australian accounts US persons have signature authority over (including employer and community service accounts even if there is no beneficial interest), if value of total foreign accounts is above $US10,000.

   Australian trusts and mutual funds for which US persons are beneficiaries are subject to US tax and compliance treatment under US Passive Foreign Investment Corporation regulations.

   Under the Australian FATCA IGA, if thresholds are met, the ATO will report financial account information of US persons to the US IRS including balances and interest. Australia is not required to report superannuation accounts under the FATCA IGA yet US law requires individuals to report superannuation accounts and potentially pay US tax on annual gains under US “non-qualified pension” rules, without credit for Australian taxes paid on superannuation and without credit against Australian tax liabilities for other types of taxes.

   Tax issues involving the overlay of the US tax code onto the Australian tax code are complex. Often considerable compliance expense in specialised tax advice is required for even for simple situations and even in cases where no US tax is owed. Any Australian residents who are also US persons should seek professional tax advice.

   4) Refer the matter to the Australian Human Rights Commission. To investigate: US extraterrerritorial double tax and compliance of Australian residents; Australian law that obliges the US tax and compliance laws on Australians who are US persons; the Australian FATCA IGA that turns Australian banks and the ATO into arms of the US IRS aiding in the enforcement of unjust tax and compliance; and the human rights abuse represented by such financial and compliance obligation with potentially bankrupting penalties if not done right.

   The information in this letter may serve as a starting point for such investigation. A human rights complaint has been acknowledged as received by the UN Human Rights Commission from members of The Isaac Brock Society and Maple Sandbox. Countries of the world acquiescing to US tax and compliance laws against their own tax residents are implicated in this compliant.

   Areas of investigation may include right to privacy, right to be treated as innocent until proven guilty, right to be free from cruel punishment, right to be governed by the government where you reside under the Master Nationality Rule, right to leave one’s country of birth, right to government representation, and right to non-discriminatory taxation.

   There is also the issue of alienation from property without compensation represented by Australia’s signing of the tax treaty. Compounding this issue is the open-endedness of the treaty not shielding those impacted over time by changes to either Australian tax laws or US tax laws resulting in a greater degree of alienation from property. Examples are that the treaty was signed before the introduction of superannuation and before the US Obamacare NIIT investment tax, the treaty did not prevent US double taxation here, thus double taxation and compliance reporting has become greater over the years.

   Fear prevents many from speaking out about these issues or even using their real names when doing so; including fear of the power of the IRS, the obtuse nature of the US tax code with changes every year, great potential penalties, recognition that there is no effective representation in the US government for the 8.7 million US persons living overseas (they would never had agreed to it all especially for no services in exchange), and recognition that the tax laws directed at US persons living overseas are divorced from concepts such as fairness or ‘liberty and justice for all.’ Australians who are US persons may be said to be subject to ‘state sponsored financial terrorism’ on Australian soil by a powerful foreign state.

   What now

   Given the four courses of action above, a letter to Chris Jordon, ATO Commissioner of Taxation might be first off. You may send a copy of this letter and ask him to “please explain.”

   You may also ask, on a “yes” or “no” basis if the ATO has the expertise to comprehensively provide information in regards to the total tax obligations (Australian + US) under Australian law (tax treaty) for Australian resident US persons. As such expertise has not appeared to be demonstrated, it appears that the answer is no. Perhaps Parliament did not ask for such advice (tax treaty/FATCA IGA), or the ATO did not insist on providing it. Or perhaps there was trusting and outsourcing to the US on these matters involving Australian sovereignty and Australian law covering Australian resident citizens and permanent residents.

   The Australian – US Tax Treaty and FATCA IGA appear to have been passed by the Australian Parliament and Senate without proper and complete review of the impacts on Australians. This is the justification for opening a Parliamentary Inquiry.

   As the ATO has responsibility and obligation to accurately report and not mislead on tax obligations (including on the ATO website), the ATO should engage a study with the likes of PwC Australia or KPMG Australia who have the required expertise. As the Australian and US tax laws are always changing it is suggested that an ongoing engagement is in order. Yes this involves spending money yet PwC and KPMG are not affordable to mere mortals. Tax can not be fair if it obligates the expense for such calibre advice for ordinary Australians.

   The next course of action may be referral of this letter to Professor Gillian Triggs and the Australian Human Rights Commission. This commission will require report from the ATO as outlined above under #2 as well.

   Below is a request that Australia should ask of the US. Yet before proceeding, Parliament needs the proper and complete information, in regards to where the tax treaty guarantees double taxation and other tax and compliance impacts on Australian residents that the ATO is obliged to provide.

   On simplification, fairness, and respect for Australian sovereignty grounds Australia requests agreement and tax treaty change with the US with EXEMPTION from US tax for Australian residents: Superannuation, personal home, estate, Australian tax free threshold, any additional US tax above Australian tax rates even 0% Australian rates and even for taxes Australia does not have, Obamacare NIIT Investment tax, and up to $5 million asset exemption and all asset appreciation while living in Australia for Australian assets – and for Australian resident US persons to be taxed with reporting requirement as “non-resident aliens” under US tax and compliance law.

   It may be said that via extraterritorial tax and compliance laws that the US is a financial bully. So then will Australia continue to participate in the bullying against Australian residents including denying it exists – no double tax here! Or, will Australia ‘call the bullying out’ as it should and shut it down?

   Thank you for your assistance.

   Joe Citizen
   @JCDoubleTaxed

9. @JC — That was amazing to read. Thank you! I am hoping the letter receives the attention it so deserves. Very well done.

10. Letter has been fired out to many
    Malcolm Turnbull
    Ambassadors / Beazley / Berry
    All Australian Treasurers
    One Nation Party
    Media (US and Australia)
    US Senate Finance Committee
    and MANY others (writers etc)

    Thanks JC hmmm JC in who we believe

11. @alby
    Not to put down your accountant or anything, but this statement left me bemused:

    “US citizens moving abroad have a requirement to lodge various forms with the IRS to advise the change in their residency status. Failure to do so means that they continue to be subject to US tax on their worldwide income, as well as the USD10,000 penalty noted above and possible criminal sanctions.”

    If they think that this only affects people who didn’t fill in some sort of exit form, they really aren’t reading things right. Maybe they are thinking of Canada or some other sane country with a sensible exit policy.

12. From JC

    Just hit double arrows

    Could use some help on retweets and favorites here:

    https://twitter.com/JCDoubleTaxed/status/656230688316723200

    https://twitter.com/JCDoubleTaxed/status/656228523917471744

13. Just hit double arrows AND star (favorites)

14. Still need more get it out there

    https://www.change.org/p/change-from-a-citizenship-based-form-of-taxation-to-a-resident-based-form-of-taxation-so-that-american-expatriates-are-not-double-taxed-for-living-abroad?recruiter=385449168&utm_campaign=signature_receipt&utm_medium=email&utm_source=share_petition

15. http://www.wsj.com/articles/fatca-crushes-minnows-the-sharks-do-better-1444941380

    AND go to JC twitter and RETWEET till the Co.. I mean Expats come home (maybe not)

    https://twitter.com/JCDoubleTaxed

16. Interesting
    Colleen Graffy is a former United States Deputy Assistant Secretary of State for Public Diplomacy for Europe and Eurasia, and associate professor of law and Director of Global Programs at Pepperdine

    The Law That Makes U.S. Expats Toxic

    “As a former American diplomat who now lives in Europe”
    By COLLEEN GRAFFY
    Oct. 8, 2015 3:00 p.m. ET

    The U.S. government has long created hardships for Americans who live abroad, and much of the problem relates to the tax code. America is the only country that taxes citizens on their global earnings, and in 2010 Washington exacerbated that by passing the Foreign Account Tax Compliance Act, or Fatca. As this law comes into force, it is doing immense harm to Americans and American interests abroad.

    Aimed at preventing money laundering, the financing of terrorism and tax evasion, Fatca requires foreign financial institutions such as banks to report the identities of their American customers and any assets those Americans hold. Institutions that don’t comply are subject to a 30% withholding tax on any of their own transactions in the U.S.

    This provision was enacted without regard for its effects on the 8.7 million U.S. citizens living abroad, who have essentially been declared guilty of financial crimes unless they can prove otherwise. Many institutions no longer consider their American clients worth the burden and potential penalties of the law, and are abandoning them in droves.

    Being an American overseas has become a liability, and not just because it’s difficult to open or keep a bank account. Americans are now often seen as toxic. Thanks to Fatca and other tax provisions, foreigners who marry Americans abroad can see their prospects for homeownership and their pensions, insurance, privacy and investments negatively affected.

    American leadership overseas, from volunteer organizations to the business world, has diminished. No one wants an American involved when their citizenship attracts a maze of rules, regulations, potential fines and criminal penalties. In one case a Swiss hospital, understandably reluctant to have its account information released to the U.S. Treasury because it has an American chief financial officer, gave the American executive a choice: Give up your job or give up your citizenship.

    As a former American diplomat who now lives in Europe, I am acutely aware of the important public-diplomacy role that overseas Americans play. It’s painful to witness the anguish of patriotic Americans as they contemplate giving up their U.S. citizenship, as record numbers have been doing. In 2014, 3,417 renounced their citizenship, a 266% increase over 2012, before Fatca came fully into effect.

    http://www.wsj.com/articles/the-law-that-makes-u-s-expats-toxic-1444330827

    from http://www.democraticunderground.com/1009366

17. In both cases, both countries can tax the income in accordance with their domestic law. Article 1 of the treaty also affirms the US’s ability to tax its own citizens.

    Our treaty with the US ( http://www.austlii.edu.au/au/other/dfat/treaties/1983/16.html ) contains two articles specifically relevant to houses:

    · Article 6 – Income from real property (e.g. rent); and

    · Article 13 – Alienation of property (e.g. capital gains)

    In both cases, both countries can tax the income in accordance with their domestic law. Article 1 of the treaty also affirms the US’s ability to tax its own citizens.

    Australia does not tax capital appreciation in the value of property (i.e. we only tax gains made on disposal) but I’m not sure about the US.

    Regards

    Greg Wood
    Senior Advisor

    Base Erosion and Profit Shifting Unit
    Corporate & International Tax Division
    The Treasury, Langton Crescent, Parkes ACT 2600
    phone: (02) 6263 3329
    fax: (02) 6263 2724
    email: greg.wood@treasury.gov.au

    From: Jak Dac
    Sent: Wednesday, 19 August 2015 9:35 AM
    To: Wood, Greg
    Subject: Looking forward to your email re tax on houses

18. Called Greg Wood
    Senior Advisor
    Base Erosion and Profit Shifting Unit
    Corporate & International Tax Division
    The Treasury, Langton Crescent, Parkes ACT 2600
    phone: (02) 6263 3329
    fax: (02) 6263 2724
    email: greg.wood@treasury.gov.au

    Called today he informs me no PUSH regarding our problem

    Guess we have to try harder

19. https://americansabroad.org/files/9114/4259/3931/concerns-about-tax.pdf

20. @JC
    Good Work on the letter, covers the issues at hand. Who else can we send to. I would suggest your local MP in your electorate. Our MP respected our privacy and is inquiring anonymously on our behalf. All other OZ Brockers can do the same if so inclined.
    Who’s prepared to front a parliamentary inquiry? We were asked that question by the MP.

21. @JakDak
    Good conversation you’ve got going with Greg Wood
    “Article 1 of the treaty also affirms the US’s ability to tax its own citizens.”
    How will the US be able to tax its citizens in Australia and collect that Tax?
    Ask Greg Wood that question

22. Australia: Is anywhere safe? Facebook privacy challenge highlights risks of transferring personal data overseas
    “By contrast, Australia’s privacy regime has always maintained that no overseas regime is inherently safe; organisations must be aware of the risks of transferring personal information to any overseas jurisdiction”

    http://www.mondaq.com/article.asp?articleid=434242&email_access=on

    Australian Government, what guarantees are in place that our Australian Citizens and Lawful Residents 30,000 bank personal records are safe in the hands of an overseas jurisdiction the IRS?

23. @Alby How about asking your MP to send that letter to the ATO with a Please Explain, also to the Australian Human RIghts Commission?

    It may all be so mind boggling, and for an MP where to begin. So maybe easier to ask them to ask ATO and AHRC. And do we apply lobbying toward that direction?

    I am still not out of the shadows yet and if I were then direct contact with MP would be the go under my real name. And as you say you may ask them to make inquiries anonymously.

24. A picture is worth a thousand words

    http://isaacbrocksociety.ca/anti-fatca-publicity-illustrations-clip-art-etc/

25. Re: JC letter

    Mr Katter, your correspondence is important and has been noted.

    Get in touch

    Robyn MacFarlane BBus(Mgt)
    Office of Hon Bob Katter MP | Member for Kennedy
    Innisfail | Phone 07 4061 6066 | Fax 07 4061 6566 |
    Canberra | Phone 02 6277 4978 | Fax 02 6277 4978 |
    Email: robyn.macfarlane@aph.gov.au | Website: http://www.bobkatter.com.au |
    Facebook: http://www.facebook.com/bobkattermp | Twitter: @RealBobKatter |

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