FATCA and Australia – Part 1 of 2

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

1. Dear JakDak,

   So sorry…my condolences on the loss of your mother.

   🙁

2. @JakDac
   Sorry to hear about your mother. My dad died 2 years ago, so I know it can be difficult dealing with these family situations when you live so far away.

   I don’t understand what you were saying about the bank. Were you trying to deposit money from Australia into a US account?

3. @JacDac, so sorry about your Mum.

   And sorry about the unnecessary problems caused by the bank, while just trying to deal with such a life altering event.

4. Sorry for your loss, JakDac.

   Keep up the good work.

5. Sorry, correction for my mistyping of your name @JakDac.

6. JakDac,

   Condolences on the loss of your mom (and previously your dad). I’m very glad you were able to make it back to the US for those times we all worry about or, in my family’s case, have already dealt with. Take good care of yourself and thanks for all you have done and will continue to do here.

7. @ JakDac
   I’m very sorry to hear of your sad trip back to the USA. My sincere condolences on your mother’s passing. You probably have a mountain of paperwork to deal with right now so may those pages turn smoothly and quickly, leaving you the time you need and deserve to adjust to this loss. Take care and pick up the FATCA fight again only when you are rested and ready. We all thank you for everything you have done so far.

8. Do not forget to post here regarding helpful Superannuation information

   Australia: Dealing with Superannuation

   http://isaacbrocksociety.ca/2016/05/15/australia-dealing-with-superannuation/#more-50201

9. I found this article on the way that the Australian Superannuation funds are taxed by the United States. It looks like the author is a lawyer.
   https://www.linkedin.com/pulse/us-taxation-australian-superannuation-fund-roy-berg

10. Slightly off the topic of superannuation, do anyone know how the IRS handle US government deemed “US persons” who get salary packaging with their Australian jobs if they worked for non-government organisations, hospitals etc. in Australia? For years I paid very little or no Australian taxes because I salary packaged my job and I received family tax benefit for having a low income job in a NGO and having children. Is salary packaging a no go area for US tax compliant individuals?

11. Ellen – your concessional contributions (salary sacrifice and mandatory superannuation guarantee) should be taxed as earned income in the US. Where you worked shouldn’t matter. As long as your total earned income is below the Foreign Earned Income Exclusion (which was over US$100k in 2015), then you shouldn’t be paying any tax on that income in the US.

12. @Karen. That is my understanding of it, also as a person with no tax qualifications. The US tax is also on account gain. So with this to avoid double counting (contributions + account gain would represent double counting) then just the account gain is considered which factors in contributions. Salary + Super Account Gain and if both under the FEIE then no US tax. I don’t know the exact computation if the total goes over the FEIE, as then there may be other credits from AU tax on earnings? Yet still no credits from AU tax on Super which is just treated as an expense to the fund. So If you earn just at the FEIE, yet account gain puts you over, then “there is the rub.” I think if you earn substantially more than the FEIE then, while you can’t count tax on superannuation gain portion, you can count the much higher (than US)Australian tax rate on earnings and at some point this may also put one in a zero US tax on super position. Just guessing here.

    Lets say over the past few years your super account is worth less than the previous year end in USD, because of the change in AUD/USD. Then that may be carried forward to offset future year gains, from my limited understanding.

    Let’s say one retires. I am thinking that the account gain would not be covered under the FEIE while considered “earnings” it may not apply. Perhaps depends on application, yet would back why my tax person said get it all out as soon as possible. Then this also is along the lines of the “high earner” treatment of tax on the way in/along the way, as opposed to “low earner under $US105,000” not taxed along the way but taxed on the way out (at marginal rates?)

13. @JC
    I posted a reply on the Superannuation thread http://isaacbrocksociety.ca/2016/05/15/australia-dealing-with-superannuation/comment-page-1/#comment-7551581

14. Definitive answer / Just spoke to your employee Steve Smith who advised to write in again I would appreciate a response

    Jak Dac

    to Senator Lindgren
    Senator Lindgren thank you for your correspondence in regard to my query.

    As evidenced in previous correspondence sent to your office I am aware that this issue may be resolved WHEN the Australia – United States Tax Treaty is next considered.

    I am asking that Treasury start transparent public attempts to resolve the tax treaty. As Superannuation has started twenty three years ago I believe that a resolution is well overdue.

    I along with MANY Expats have sent submissions to the US Finance Committee. They released over an eighty page report that only included one paragraph (Section F) acknowledging our concern but nothing further.

    I would ask that your office pursue a more definitive answer than ” when the treaty is next considered ”

    In the letter to you from Ross Vasta under the subtopic

    ” I seek your assistance in the following ways:”

    I would ask that your office obtain specific answers to the issues highlighted.

    Sincerely,

    JD

    ANYONE else care to write in ??? senator.lindgren@aph.gov.au

15. Just called aide at Senator Lindgren’s office he stated last week he saw something on ABC News 24 re Americans and Expat issue anyone see this ? If a link found please post. START writing could be good timing.

16. Is it this?

    Turnbull’s tax plan will deliver multi-billion-dollar ‘gift’ to US Treasury, research shows / Stephen Long

    http://www.abc.net.au/news/2016-05-16/tax-treaty-to-deliver-billions-to-us-treasury/7416534

    or this?

    Who will actually benefit from the Government’s company tax cuts

    http://www.abc.net.au/news/2016-05-16/who-will-actually-benefit-from-the-government’s/7419396

    Not about FATCA though

17. Ellen,
    That’s about company tax only, so not the same as the issues for US expats in Australia.

    US companies are taxed on worldwide income only if they return the cash to the US. If they reinvest in Australia, then the US can’t tax their Australian income. If they don’t reinvest in Australia, then the earnings go back to the US and they get a credit for Australian tax paid. If Australian tax rates are cut, the credit is cut and they pay more money to the US.

    So, whether US companies in Australia will actually benefit from the proposed cuts to Australian company tax will depend on how much of their earnings they reinvest here. My guess is that a larger difference between US and Australian corporate tax rates will be an incentive for US companies to reinvest their profits here in Australia. (Assuming they don’t use transfer pricing and other means to move Australian profits to Ireland)

18. Obama budget: “Dual citizens from birth” who are NOT “US residents” should be taxed as non-residents

    http://www.citizenshipsolutions.ca/2016/05/21/obama-budget-dual-citizens-from-birth-who-are-not-us-residents-should-be-taxed-as-non-residents/

19. Remember

    Submit Your Comments and Questions Online

    https://www.whitehouse.gov/contact#page

20. 24 May 2016.

    Honourable Senator Lindgren
    Senator for Queensland, Australia

    Dear Senator Lindgren,

    (JD) has shared with me your letter to him dated 9 April 2016, in regards to unjustifiable tax treaty gaps and US extraterritorial taxation of Australian Residents including of Superannuation.

    (JD)’s letter: http://isaacbrocksociety.ca/wp-content/uploads/2016/04/JakDak-Correspondence-to-and-answer-from-Australian-MP-Ross-Vasta.pdf

    Thank you for forwarding to Scott Morrison (JD)’s letter written originally to MP Ross Vasta, and providing the Treasurer’s response.

    In my opinion, The Treasurer’s response shows superficial consideration of the issues and impacts, and complete disregard of Australia’s sovereign right to solely determine laws for Australian Residents.

    Over decades both Coalition and Labor Governments have exhibited an unacceptable pattern of: not questioning US extraterritorial tax and compliance law, disregarding Australian Sovereignty in this matter, and disregarding /not quantifying the dollar impacts on Australian Residents. A Senate inquiry at this point is warranted.

    There has been a general lack of understanding among MPs and Senators in regards to the impacts on Australian Residents of the Australian-US Tax Treaty (Tax Treaty Gaps) and the Australian FATCA IGA. Morrison says that it is a matter for the US Government “in the first instance.” This is wrong. As these treaties represent Australian Law impacting Australian Residents on Australian Soil, in the first instance an Australian Citizen Resident in Australia should raise the issues with the Australian Government. The Australian Government should not pretend otherwise!

    Quoting Treasurer Scott Morrison:

    “…under US law, the US can tax its citizens on the worldwide income, regardless of where they reside. In this regard, your concerns about the application of US tax law to your Australian superannuation entitlements are, in the first instance a matter for you to pursue with the US Government.”

    For an individual to pursue the US Government in the first instance would make sense in the case of an Australian resident in the United States. For the Australian government to question US tax and compliance law in such circumstance might be characterised as Australian intervention into the internal domestic affairs of the US. Under the internationally accepted convention of The Master Nationality Rule, the law of the country one is in prevails to the exclusion of laws of other sovereign states.

    Morrison’s reply is similar to saying that the US can decide gun laws for US persons in Australia – based on US law and the 2nd Amendment to the US Constitution – “The Right to Bear Arms.” This is exactly what he is saying: it is ok for US law to apply here in Australia! It sounds ridiculous, doesn’t it? It is preposterous. Common knowledge and practice is that the laws one is governed by are the laws of the country one is in. “Tax Residency” is another level to justify exclusion of laws from other countries.

    Likewise, Australia has a sovereign right to determine the entirety of the tax and compliance laws for Australian Residents, no matter where they are from, especially for Australian earnings, income, accounts, and assets. Morrison is not saying this. He has also not acknowledged that via the Tax Treaty that Australia has conceded to the US Australia’s sovereign right to solely determine tax and compliance laws of Australian Residents. Under Australian Law represented by the Tax Treaty – covering all matters tax and compliance between Australia and the US – Australia consents to US extraterritorial tax and compliance by not saying otherwise.

    Morrison’s comment also perhaps reflects that he is not fully aware that it is Australia resident Australian Citizens and Permanent Residents (many who have called Australia Home for decades) who are in the cross hairs of this Australian Law. The Tax Treaty mitigates Double Taxation yet the reality is that it also guarantees Double Taxation and Double Compliance. The impacts are made more onerous by the recent FATCA and Australian FATCA IGA (Australian Law) forcing additional reporting by individuals and Australian financial institutions reporting on US person accounts in Australia – more reporting than is even required of accounts in the US, and with risk of substantial new penalties.

    Morrison also appears to have not contemplated that such laws unfairly siphon off Australian ‘wealth for toil’ to the US. It’s a form of tax cheating by the US unfairly demanding money from Australian workers (already paying their fair share of taxes to Australia) with a treaty cloaked in the ‘double speak’ of ‘preventing double taxation.’ Morrison should object. Accidental American Boris Johnson MP in England called such extraterritorial tax laws “outrageous.” So should Morrison.

    Under Australian Law it has been legal for multinationals to shift profit to lower tax countries. Morrison and Labor did not say to this ‘the law is the law’ and look the other way. They said this is unfair, Australia is being cheated, and that Australia will change the laws including adding measures such as the Google Tax. Similar action is needed to change Australian Law to stop US Extraterritorial Double Taxation and Double Compliance.

    Slavery was once “the law” and legal! Being “the law” did not make it right, although “laws” generally reflect and are expected to reflect fairness.

    The purpose of the Tax Treaty is to eliminate Double Taxation. Morrison does not dispute that the treaty fails in this regard for Superannuation accounts of Australian Residents.

    Mr Morrison may please tell us the Australian Domestic Policy objective of US extraterritorial taxation of Superannuation, and generally US Double Taxation?

    Australia has had 20+ years of Superannuation to work through an exemption in the Tax Treaty. The US will not volunteer to give up the Double Tax claim and cash stream. Australia must ask for exemption and be willing to bargain hard for it expressing a sovereign interest to do so.

    Donald Trump has expressed interest in re-examining all US international treaties in regards to the sovereign interest of The United States. Likewise, Australia has right to review the Tax Treaty with the US based on Australian sovereign interest. Just because there is a “treaty” it does not mean it is fair, “cast in stone,” or may not be changed by Australia.

    In my opinion, the Tax Treaty represents Australian Government Malpractice; and Morrison’s reply is evidence that the Competent Authorities are shirking responsibility in regards to protecting Australian Residents. The Australian government thinks it has done right by Australians with an “all good” agreement. It may be said that the Tax Treaty has demonstrated serious open-ended detrimental provisions with a woefully inadequate decades-long review and remedy mechanism. Thus the Tax Treaty is broke and needs fixing!

    The tax treaty is not ‘water tight’ to prevent US Double taxation of Superannuation. Decades after the introduction of Superannuation the Treasurer acknowledges Superannuation exemption should be added to the Tax Treaty. However, he seems to want to leave remedy to the US as if this Australian sovereign matter is a matter for the US, and as if he thinks the US will prioritise Australian domestic sovereignty concerns over US “law!”

    If Morrison agrees to Superannuation exemption he should also agree that Australians should be shielded from the range of US extraterritorial tax and compliance obligations. Other examples Mr. Morrison may tell us how it is Right: how is it right for the US to tax Australian mutual funds punitively under Passive Foreign Investment Corporation (PFIC) rules; how is it right for members of Parliament to enjoy use of Family Trusts yet for other Australians to get extraterritorial US PFIC treatment; how is it right for the US FBAR rules to require the reporting of Australian company confidential accounts to the US Financial Crimes Enforcement Network, those accounts one may have signature authority over as an employee of an Australian company on Australian soil???

    The Right Answer is Australian Government prioritisation with urgency the review of the Australia-US Tax Treaty to close Tax Treaty Gaps. Changes in Australian tax law and changes in US tax law may mean Double Taxation further guaranteed, not “prevented” under the current Treaty. Any different tax that the US has but not Australia, any higher tax rate, or any tax by a different name means Double Taxation guaranteed, not prevented.

    The Tax Treaty needs added robustness to make certain future Australian and US tax changes don’t guarantee Double Taxation of Australian Residents. No other foreign country makes such extraterritorial claims on Australian Residents (besides Eritrea). Therefore, the review of the Australian-US Tax Treaty needs extra resources, scrutiny, and priority.

    A US tax advisor has told me not to put in any after tax money into Superannuation, and to take the money out as soon as possible and incur Australian early withdrawal penalties. This is not a little impact of US and Australian Law (Tax Treaty) but disruption/interference into domestic Australian policy objectives. It is 180 degree opposite of what Australian financial planners advise.

    Rest assured that Australians have addressed these matters with the US Government repeatedly over many years. More recently Australians have made submissions to the US Senate Finance Committee on Tax Reform, and to the US House Ways and Means Committee. The US Government has demonstrated no effective mechanism to remedy such claims of unfairness. Meanwhile the US bureaucracy over the past decade has increased the tax and compliance requirements on US persons in Australia (through tax treaty gaps), while making it harder and more expensive, even prohibitively expensive to renounce US Citizenship (which some claim a Human Rights violation). The US Government is either indifferent, politically gridlocked, or both.

    With the US Government, and thus far with the Australian Government, “Representation,” “Democracy,” “Justice,” and “Fairness” appear unfunctional concepts for Australian Residents the US considers US persons.

    The Australian Government, representing a sovereign nation, is obligated to protect its Citizens and Residents on Australian soil from attempts by foreign countries to apply laws on them that would disadvantage them, or make them 2nd class, compared to other Australians. So far the Australian government has shirked such responsibility!

    Ms Lindgren, I imagine that you may think a “flood” of letters on this topic may help prompt action. The Australian residents in question number less than 100,000 so a “flood” of letters is not likely. However, consider it this way: if there was an Australian referendum on the matter YES let the US keep double taxing these Australians and NO stop it. I realistically imagine that Australians in such a hypothetical referendum would say NO to US extraterritorial tax and compliance of Australians. Australia supports ‘Residence Based Taxation!’ So then backed by such referendum results, initiating a Senate Inquiry is further supported.

    Highlighted is the malpractice of a few responsible entities/portfolios in government– especially the Competent Authority – who have, in my opinion, misrepresented the Tax Treaty and FATCA IGA to Parliament (these laws work together so should be considered together); and who continue to think these Australian Laws are all a matter for the US to sort out the impacts, fairness, and treaty modifications for Australian Residents.

    In sum, a Senate Inquiry is warranted as the Australian-US Tax Treaty and Australian FATCA IGA, in my opinion, did not receive adequate review in Parliament as they were generally mispresented as “all good” and “preventing double taxation.” Real “every day” Australians on Australian Soil are being hurt and disadvantaged and discriminated against under such Australian Laws. A focus should be on what the laws actually mean – in the life experience of those affected including the dollar and compliance impacts. Please initiate a Senate Inquiry.

    Also, the ATO has perpetuated the myth of the Australian – US Tax Treaty as “all good” by saying on the ATO website that tax treaties “prevent double taxation” without footnote for the treaty with the US. I might imagine if the ATO were a private company that its misrepresentation of the Australian-US Tax Treaty as “preventing double taxation” would leave it open to ACCC persecution.

    Directly contacting the ATO Commissioner Chris Jordon on these matters is warranted, including (JD)’s original letter, and with a “please explain” and a please remedy the ATO website where it might mislead that the Tax Treaty with the US “prevents double taxation.” Perhaps Parliament did not ask for it, but the ATO had and has the responsibility to properly inform and not mislead Parliament and Australian Residents on tax and compliance obligations under Australian Law including under the Australian-US Tax Treaty and Australia FATCA IGA.

    Please refer to action point requests from (JD)’s letter:

    * Initiate a Parliamentary Inquiry

    * Request the ATO to report to Parliament on: Australia – US Tax Treaty Gaps impacting Australian tax residents.

    * Request the ATO to amend their misleading website information

    * Refer the matter to the Australian Human Rights Commission

    A proposed remedy:

    On simplification, fairness, and respect for Australian sovereignty grounds Australia requests urgent 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.

    I appreciate your consideration.

    Regards, Joe Citizen
    @JCDoubleTaxed

    This letter is an open letter and the author provides consent to reprint and will post on the web.

21. JC. Mark Twain said it best- very few sinners are converted after the first 5 minutes.

22. @JC, thank you for posting this and thank you to you and your fellow Aussies who are fighting a good fight. I am pretty discouraged this morning fatcawise and this has lifted me up.

    The second amendment analogy is spot on.

23. @George & @JC

    I hadn’t thought about gun rights and the fact that the AU gov’t is cherry-picking which US laws to “allow” & embrace?

    The truth is that the AU gov’t are lapdogs to the bully USA, that much is clear. The trouble is getting the message out. I recently told two clients (duals) what I’d been through. I believe they came to AU decades ago & have never filed tax in the USA…I gave them this site. I hope they aren’t ruined by it.

24. Well done, JC! Great, hard-hitting letter! May it bear fruit!

25. @Jane, now think it through another step…..

    The US Government believes that its laws have extraterritorial effect.

    The US Constitution says that US Citizens have an inalienable right to keep and bear arms and said right shall not be infringed.

    Will the US Government now intervene to ensure that your right to keep and bear arms as a US Citizen shall not be infringed?

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