FATCA and Australia – Part 1 of 2
January 2020: This thread continues at FATCA and Australia – Part 2 of 2.
Let’s Fix the Australia/US Tax Treaty! The Australia/US tax treaty needs urgent revision to prevent double taxation. Get involved at www.FixTheTaxTreaty.org
Posts on The Isaac Brock Society website concerning FATCA and Australia
For articles on other websites, see Media and Blog Articles
For general discussion of FATCA, see FATCA Discussion Thread
For links to some websites and contact info (government, organisations, tax information), see Australia Information Links
25: John Richardson and Karen Alpert Session in Brisbane Australia Oct 25, 2018
August 2018
01: U.S., U.K., Canada, Australia and Netherlands form international tax enforcement group
January 2018
July 2017
March 2017
13: What Lessons Can Be Learned from the Sad Stories of “IRS Compliant” Australians Shaun and Mary?
November 2016
30: “Solving U.S. Citizenship Problems” – Online January 9, 2017 (Australia)
August 2016
25: Let’s Fix the Australia/US Tax Treaty!
May 2016
15: Australia: Dealing with Superannuation
February 2016
19: #Australia funds America’s #FATCA #Ethnic Identification System
September 2012
27: Last Day to make a FATCA submission to the Australian Govt
August 2012
28: Australian Government wants YOU to tell them what to do about FATCA
July 2012
20: Australian Financial Services Council lobbies Washington for FATCA exemption
@Stressed,
I moved to AU in 2007 & am up-to-date tax-filings-wise. I’d decided, then, that I wasn’t going to return to live in the US. But with FATCA, retaining US citizenship will make it impossible to live, bank, have retirement funds, etc…in AU- not to mention all of the “what-ifs” like, will the cost to renounce go up another 422%? Will even more discriminatory add-ons get tacked to this so that it gets even harder to comply? Will the costs to lodge a no-tax-owed return eventually become too expensive a burden (assuming you find someone qualified)? I agree with John Richardson that the only sane response in the face of FATCA, assuming you’d like to actually live your life, is renouncing. I feel terrible for those with many ties still in the US- that would make this a much harder decision. The USA has failed all of us. It’s shameful.
@Jane
Wow. The hard truth.Our lives are here and we no doubt will remain here, but travel to the US every year to see family. It seems to renounce, is not easy and the fact that your name is published on some roll is also concerning. Not to mention if they think you are renouncing for tax purposes, you aren’t allowed. What if he can never go back? But I agree, FATCA has changed the world. Have you ever thought about simply stopping lodging? It is so shameful!!
@StressedinAus, I’d be happy to contact you by email. (@mods – please send me StressedinAus email or vice versa)
Renouncing to avoid the compliance nightmare is not the same as renouncing to avoid tax. They can’t refuse a renunciation for tax avoidance; though theoretically they can refuse to let you back into the US. See this post http://isaacbrocksociety.ca/2016/03/23/homeland-security-enforced-reed-amendment-twice-in-14-years-banished-two-ex-citizens-who-mentioned-tax-motivations/
@Karen and StressedinAus,
Thanks, Karen. Done.
Thanks @Pacifica.
@All
Did anyone Streamline like we did? Did we put a target on our back? Has anyone just simply stopped lodging or too scared? Will they really come after the little people? Oh man, SO MUCH STRESS! Haven;t eaten for 3 days and 2 nights with no sleep. As you can imagine, I look a real treat!!
@StressedinAus You might as well take a break from it all, make some nice weekend plans. There is no quick and easy answer. Some say the answer is different for each.
You might think about joining the resistance – speaking out against it all.
I have heard no stories of the IRS going after “the little people.” I have heard Boris Johnson getting chased. Here is where they get you: state sponsored financial terrorism, which includes the trend in recent years of tightening the virtual nose. Where many get caught is that it is all so complex they get professional tax advice and that is then where all the rules come into play. Those offshore programs to “help” bring people back into compliance is another. Another is the five years of compliance to renounce US citizenship. Another, is people have relatives, ties, and connections to the US and don’t like the idea/fear of never going back.
The only extraditions I have heard of was of an (Italian I believe) banker assisting US residents set up offshore accounts with intent of tax evasion. There is a case of an 82 year old Florida man, talked about by Robert Wood, who got smashed by FBAR penalties, yet what does he expect having an unreported offshore account in Switzerland.
Republicans Overseas has a lawsuit with eight claims that FATCA and FBAR are unconstitutional (it would be nice to hear some progress with that). They have in their platform shift to residence based taxation – yet we have not heard acknowledgement of this from Trump or Cruz; and it is the Republican Congress who passed the passport revocation law without carve out for US persons living overseas.
I am hoping that the Canadians set some precedents with their lawsuit and legal action – all that takes years.
So you did Streamline?
@JC…
Thank you for your advice… Make some weekend plans. Sounds like a nice idea, but this is a cloud hanging over our heads and will for the rest of our lives. How can the USA do this? We are just hark working people who want to retire (in many years) but we won’t even have the money to do that thanks to the US taxing us on it. Not to mention selling our house.
Yes, we Streamlined. Which is what I think was a big mistake. Would they have ever found us? Even with you needing to put your SSN on your passport now? I don’t know. We don’t make a ton of money and are most definitely NOT tax evaders. We did get a tax professional to help us. Oh great, was that a massive mistake? Have we shot ourselves in the back?
There could be change, but like you said, it all takes years. Even is Sanders gets in and he supports RBT, how long would this take? And would the USA really change? It is just so much!!
@StressedinAus there is lots of stress around the OMG moment. Yet you say after Streamlined. Once you do that they will really not be likely to audit those years. As you are complying then there are mitigation steps of separating accounts, consolidating accounts to minimimise compliance, no mutual funds in hubby’s name, try not to have house in hubby name, no SMSF or trust with husband as beneficiary, kids – best to have them born in Australia without US citizenship then they must claim by 18 if it is desired at the time, hubby goes for Australian Citizenship and starts to develop renunciation option.
As you are fully compliant and proven so by the IRS then that puts you in a good position to speak out. Others are hiding in fear where you are IRS verified compliant.
Your husband must have said the Pledge of Allegiance lots of times in school, yet that was to an America which stood for ‘Liberty and Justice for All’ not what “America” is doing to US persons living overseas.
On the Australian side I do note in my letter to Xenophon the “alienation from property” of Australian US persons represented by signing the tax treaty. It is all not right for Australia to say it is a matter for the US how Australians on Australian soil are taxed while saying the tax treaty “prevents” double taxation. I see lots of uninformed denial and thinking that the tax treaty is all good, and without proper recognition of tax treaty gaps – such as on the ATO website. Others have gone to their MP expressing fear of it all. You may demonstrate substantial costs to you/your family and proof the tax treaty does not “prevent” double taxation. That would be powerful.
@JC…
The initial stress when we got the letter in the mail saying that hubby’s bank had recognised him as a ‘US Person’ and he had to provide details under FATCA was very stressful. What do we do? Yes, even after Streamlining we are stresses. DID WE DO THE RIGHT THING? Could we have continued to stay in the dark? Probably, but who knows. Did we jump the gun and go too early on being compliant and wait until we were ‘found’? What does this mean for the future as far as eventually paying into the US? So now, not worried about being audited, worried about having to eventually pay and the cost that we have each year to lodge the difficult paperwork.
You gave some great tips and I really appreciate that. We definitely need to close our joint back account. And buying a house… wow, why was this not something we knew before it happened? Now, we are at the US tax peril because we fell in love and live in another country. We pay in to each of our super accounts. What would you suggest there? Stop it at once? @Karen also said to not go over the amount as it could impact payment to US.
I read your letter to Xenophon. Fantastic!!
Have you renounced?
EVERYONE start writing and visiting their Federal reps. Also write to the reps in this forum already contacted.The treasurers email page has many treasury position emails on one page thus copy and paste for them all. Write to the PM. As JC does use twitter . Facebook is also good.
Post letters and responses here as the more info we have the more we can share it. I myself every so often send a BIG bcc email to people on the US Senate Finance Committee, US newspapers, Oz officials, helpful US groups etc.In the forum I have posted an earlier version of these emails. Once this becomes an ISSUE then we have a chance.
Remember ” Common sense is not that common”
@StressedinAus
If you read my story on the Brock’s home page you might not feel so bad. At least Streamlined was created after many of us minnows were unnecessarily turned into grist in the OVDI mill. As for lamenting the past? What’s done is done. Maybe turning your actions into something constructive, as I think JC is suggesting, might help you feel better. I’m compliant, as your husband is. I use the fact that I am to advocate for change both here in Canada and the US. My fear has turned to outrage! I have to admit though that after 5 years of what feels like spinning my wheels, I’m getting pretty tired. Doesn’t seem to stop me though. Tomorrow’s another day, and another promise of a day where the tide might turn in our favour.
@StressedinAus. FATCA strikes! If you read the whole thread then you may have seen in early January an AFR reporter looking for people willing to interview who were harmed by FATCA. Please consider – because I don’t think they found enough direct harm from FATCA to support their article. Maybe we could reinterest that reporter as they had a relative terrified by it all. The press do not like opinion, they want personal stories. The press are a bit funny in that CBT is the harmer but the press gets fixated on FATCA. This looks like the most compelling story I have heard in Australia in regards to harm from FATCA.
I have not renounced – I figure its too costly to do so. Others I know here at Brock are calmed by renunciation yet remain some of the staunchest advocates for shift to residence based taxation.
In regards to Super, Karen meant not to put in extra aftertax contributions. So “we fell in love with the country” sounds like both from US, but you are only Australian right?
@StressedinAus,
My wife got a letter from BNY Mellon in 2009 asking for her SS number etc. She had a UK ISA (with Newton) in the UK from prior work. We are immigrants. This started our very expensive journey with tax pros and eventually OVDI. We paid penalties in the OVDI of something like $30k. We paid a massive tax bill as well because of PFIC taxes. Took a nightmare 2 years to escape that crap. Steamlined is a lot better.
My worry of course is that OVDI is final and they can’t do anymore to us. Streamlined has no guarantees and they can turn on you forever. Likewise though we are never going to see a large sum of money again and that was their goal.
Educate yourself here and other places. It’s too expensive to get pros to help you unless you have millions. Good luck and I am sorry you suffered the same way I did. Worst two years of my life.
@StressedinAus – forewarned is forearmed, or something like that. It is possible to live as a US tax compliant Australian resident with very little US tax paid — at least until you retire.
For super – don’t make any contributions over the 9.25% super guarantee (well, you could possibly make more pre-tax/salary sacrifice contributions, but you need to run the numbers first). And definitely no after-tax (non-concessional) contributions. If you’re in a standard fund (industry fund or retail fund), and all of the contributions are employer contributions then it is probably classified as a 402(b) plan for US tax purposes. This means: Contributions are taxed by the US on the way in. A portion of withdrawals is taxed on the way out. No tax on current earnings inside super. (this is my understanding of the law, not tax advice – I am not a tax professional)
outside of super – no managed funds (or REITs or ETFs), house in your name, make sure the total value of accounts (bank accts plus brokerage accts) he is named on is no more than US$10,000. If he wants to save more than that, he should try to find a US-based account (pretty hard to do, but possible) – of course, that exposes him to currency risk.
And I second what Bubblebustin and others have said — use the opportunity of being compliant to freely advocate for change.
One problem with super is that it may not be moved outside of retirement which may cause problems if one is trying to reduce assets to get under the Exit Tax threshold. Other assets may be moved around. You might note the gift allowance to nonUS spouse of $145,000k per year to help move money around.
@Karen I have not heard that about EFT, only mutual funds. In terms of super treatment (the tax is convoluted to the extent that one adviser may say one thing while another may say something else), if you are determined a “high earner” something like $US105K per year the tax is on the account gain each year at the US marginal rate – and I think then not taxed upon withdraw. If low earner, then taxed on withdraw like 401K and IRA. Who knows what happens if a “high earner” one year but not the next etc.
In terms of $10K, they are already IRS certified compliant. Ok as long as the accounts are reported FBAR, 8938. It helps not to have too many accounts to lessen the compliance and risk of error. I heard the US treats a CD as a reportable account , then they get rolled over then each time a new number to report – so that may be messy especially when you must also report accounts closed.
Australian dividends. The US does not recognise Australian franking credits. May best in nonUS person name.
All not double taxation prevented.
@JC – ETFs are Exchange Traded Funds — just like managed funds but traded on the stock exchange. A great way for non-US Persons to get investment exposure to a wide variety of asset classes. Vanguard has a Bond ETF in Australia — probably the easiest way for a retail investor to invest in bonds. There are also small-cap ETFs and a bunch of others. REITs are Real Estate Investment Trusts — they’re PFICs as well — several are traded on the ASX.
If super is classified as a 402(b) plan (and this depends on the facts and circumstances, but should apply to most corporate and industry funds, and many retail funds), then contributions are taxed, but income inside the fund is not taxed until withdrawn. I don’t know whether you need to be careful about transferring between funds as this may change it from a 402(b) plan to something less favorable — get professional advice before making any changes. My understanding is that the “high earner” rules only apply if the plan is not universal (there are technical requirements about coverage of low earners as well as high earners). The real thing to avoid is having the plan defined as a grantor trust – then income inside the plan is taxed currently.
As for dividends – you don’t get the franking credits for franked dividends, but only the cash dividend is taxed by the US (unlike Australia where you add the franking credit to the cash dividend, compute tax, then subtract the franking credit from your tax liability). For us, it ended up not being a problem.
@Stressed
Here is the site which lists those who have given up their citizenship (quarterly report):
https://www.federalregister.gov/quarterly-publication-of-individuals-who-have-chosen-to-expatriate
I, for one, cannot wait to see my name there & know I’m “out” of this insanity- I have it bookmarked so I can print it out & frame it later. I do feel sorry for you in that you have relatives back in the US to add to your concerns. However, I don’t see anything that says your husband can’t simply renounce, stating that his life is in AU now & that issues are arising (banking, investing, etc) which are negatively impacting his life? Having AU citizenship is a plus when it comes to renouncing- as the US doesn’t like “statelessness” (even though they technically can’t stop a person from becoming stateless).
The bit about the US denying a visa has to do with those people who actually “owe” tax/have hidden accts. & then try to get out from paying it– not those who are compliant (as far as I’ve read), so I highly doubt you’d be prevented gaining a visa to visit relatives in the states.
I guess it comes down to whether retaining citizenship in the US is worth the stress trying to comply (& the “future possibility” of the already horrifically inscrutable tax laws/fees/fines becoming even more-so) vs. renouncing & being done with it. In case you missed it, here’s a great set of videos created a couple years back re: Canada trying to formulate it’s court case. I watched it all but was especially impressed with part six, the presentation by Alison Christians, law professor at McGill university in Montreal & formerly tens years teaching int’l tax law in the US:
https://www.youtube.com/watch?v=R__KgHq0vRE
You’re not alone & you have a lot of good people here with lots of good advice & information for you to use to determine your way. Good luck, whichever way you go!
@BB…
Love your positivity! Nice to hear. I would love to see change, love to see our government do something about THEIR citizens. You don’t realise at the start when it is all love and peaches, that you are then going to deal with the horror. Really appreciate it :).
@JC…
Correct, I am Aussie, hubby is American. I was just meaning that we fell in love and live in not his country I suppose, and this is what happens to us. Yes, I did read that thread last night about the reporter that was looking for people who had directly been affected by FATCA. That is us. If that didn’t exist, we would not have Streamlined and become compliant. Because we would not have known. You think that our story is the most compelling?
Are you living in Aus? Hubby can’t believe that it has come to the possibility of renouncing. How can this be ok? Of course the US Government doesn’t care, it is us who is affected. Are you compliant or are you hoping to fly under the radar? Interested that you found renouncing too costly.
Thank you for the gift allowance tip. This seems doable. Especially when retirement eventually comes (still quite a ways a way). Are these the measures you have had to take?
@Neill…
You had to pay that much?! This scares the complete life out of me. What if it comes to that? Haha! Definitely do not have millions. Not even close. We are just hardworking and want to save the best we can for our future… and not lose it to a country we don’t live in.
@Karen…
‘At least until you retire’. Great :)! Unfortunately, under FBAR, we have disclosed amounts for him that are over $10 000. Such as his own account where his employer pays in to. How do we keep that down? Closing our joint account tomorrow. I guess we could transfer large sums in to my account? Keep his under the $10 000?
@Jane…
I read your story about renouncing on another forum. What embassy did you use in Aus? Seemed like it came through fast. Were the questions that they asked tough and taxed based? That dreaded list :). I am honestly happy for you that you are really relieved about your decision. I can honestly see why you decided to. It is the traveling back to the USA that gets us worried. How will the border security guys treat him when they see that he has renounced? He would want to travel back each year. Family means too much to drop that. Massive concern for us.
@All…
Thank you. We can’t do anything now. He has Streamlined which means he is on the radar. If we stop paying, they will know. FBAR is a nightmare. FATCA is a nightmare. I can’t believe the Australian Government is happy that Aussie dollars are going to the USA. Blows my mind!!
@StressedinAus
If you’re more than a decade from retirement, the superannuation problem may be fixed by the time you retire. The latest model tax treaty would fix it, but our government doesn’t appear to be in any hurry to renegotiate the treaty.
Of course that still leaves all the other problems. The only real solution is for the US to join the rest of the world and tax based on residence rather than citizenship.
@stressedinAus
The embassy do not ask you any tax based questions at renunciation The only question they are permitted to ask is if you are doing it of your own free will and that no one has coersed you.
There have been few reports of bring questioned at the border. Most have been because of a US birthplace on entering on a non US passport. That is why you should carry a copy of your CLN or receipt for your renunciation with you. It is your human right to decide to renounce. It is no big deal anywhere else, the US have brainwashed their citizens into thinking it is somehow traitorous.
@StressedinAus,
We probably paid $20k in legal costs and maybe another $16k in PFIC taxes. My wife saved a lot in the UK and the ISA just killed us.
Now one of our UK pensions that we can’t do anything with has so far refused to give us the balance. They don’t want to deal with US persons. I’ll likely have to file an extension just for this. Might have to file the FBAR twice if they are really late telling us the balance.
Too expensive to consolidate the accounts for the money we have. UK financial pros mostly can’t deal with US persons.
I mailed our three congress democrat leaches to express my displeasure yesterday.
@ Stressed
“@Jane…
I read your story about renouncing on another forum. What embassy did you use in Aus? Seemed like it came through fast. Were the questions that they asked tough and taxed based? That dreaded list :). I am honestly happy for you that you are really relieved about your decision. I can honestly see why you decided to. It is the traveling back to the USA that gets us worried. How will the border security guys treat him when they see that he has renounced? He would want to travel back each year. Family means too much to drop that. Massive concern for us.”
I went through Perth. They didn’t seem to know what to do when I approached for my relinquishment. They weren’t at all about tax– in fact they only asked I hand-write my misunderstanding as to why I didn’t apply sooner.
Afterwards, however- they fell down & either stated things wrong or never got back. Terrible treatment considering the gravity of the event- (imho).
J
@stressedinAus
I am an US tax noncompliant Australian citizen, born in the US. I have lived in Australia for nearly 4 decades. I moved to this country when I was a child with my family. I now have family here in Australia, and in Canada and in the US. The only reason I know about FATCA is from a sibling who lives in Canada, next door to the bully. From the few Australians and New Zealanders I know with duel US citizenship, none are US tax compliant. It is heartening to know that. One could not believe that the US could behave in such a manner. (There must be many like that in Australia). The duel NZ-US citizen thought she was safe because she entered Australia on her NZ passport. She would not dream of telling her bank that she was born in the US (she knows about FATCA). One who has a US passport because her mother is American will not renew her US passport because of FATCA.
So far I believe I am off the IRS radar. I don’t want my extended family caught in this nightmare. I don’t make very much money to be even be taxed in Australia. I am on a very part Disability Support Pension. My non-US spouse would hit the roof if I spent money on putting US tax returns in or spending over AUD$3000 dollars in renouncing my US citizenship. I don’t want the IRS finding out where my Australian siblings and their families are either.
@ Jane…
That all sounds so weird!! At least it all got sorted out in the end and you have been able to put this all behind you!!
@Ellen D.
You are lucky that you have been here for so long :). I think we got the FATCA letter in the mail because mu hubby has been here for 7 years and of course, signed up to banks with his US passport. So when FATCA came in to play, he got a letter and it all got started for us. You are lucky and if I was you, I wouldn’t do anything either. I know at least 15 other Americans who have been here 20 plus years and have never lodged and never will. I know a couple in their 60s who recently became tax compliant because they inherited an estate in the USA. I wish we could go back, I really do. We do not earn much money. The financial cost to renounce will hit us, but we won’t have a choice one we start paying in to US taxes. So sad.