FATCA and Australia – Part 1 of 2

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

1. http://fixthetaxtreaty.org/2016/12/04/when-tax-professionals-disagree/ – discusses how application of US tax law to foreign structures has evolved over time – and makes the point that there may not be one right answer.

2. One right answer here:

   RBT

   😉

3. Jane – absolutely! Now, how do we convince Congress? 😀

4. https://www.reddit.com/r/expats/comments/5gnoxq/were_australian_expats_living_in_the_us_would_our/

   Ultimately, we’d like to raise a child back home in Oz but we’re committed to being here for the next few years.

   Any major downsides the child will face by being an dual American (by birth) and Australian (by descent) citizen?

   Featuring the obligatory reply by someone who’s convinced it’s just a “minor inconvenience” (i.e. he ain’t reporting his Super)

5. Thanks for that, Eric. I have posted a comment on that thread.

6. Today I called Alan Colmes on Fox Radio just prior to noon in Qld.
   http://radio.foxnews.com/fox-news-talk/alan-colmes/

   I told him our situation regarding CBT and how our children would also bear CBT.
   I also informed him re FBAR reporting.
   He was NOT aware of our situation and sounded sympathetic.
   If we get on the US airwaves maybe we can get this out.
   I used the android app for fox radio
   https://play.google.com/store/apps/details?id=com.airkast.FOXFM&hl=en
   and Hangouts
   https://play.google.com/store/apps/details?id=com.google.android.talk&hl=en
   and Hangouts Dialer to call US telephone numbers
   https://play.google.com/store/apps/details?id=com.google.android.apps.hangoutsdialer&hl=en

   Go for it

7. @OZ Brockers, thank you!

   Cheers
   George

8. Seeing Federal rep early next week 1 page dot points welcome. Maybe put here for all to use on your visit

9. Hon Andrew Hastie, MP

   Dear Andrew Hastie-

   I seek your assistance in how one might go about initiating a Senate Inquiry regarding “tax treaty gaps” of the Australia-US Tax Treaty.

   A purpose of the tax treaty is to prevent double taxation. However, Australian law (the tax treaty and FATCA IGA) permits the US pretence that US persons tax resident in Australia are also tax resident in the US.

   Thus Australian law obliges the overlay of the US tax code on top of the Australian tax code for law abiding Australian residents. Double taxation occurs in the mismatch of the two tax systems: when the US has any different tax, any higher tax rate, or a tax by a different name than Australia. Additionally the US code penalises assets and accounts foreign to the U.S.

   An international tax expert Allison Christians calls areas where double taxation occurs “tax treaty gaps.” I call it tax treaty malpractice.

   Communication from Treasurer Scott Morison indicates that he believes the matter should be raised with the US government in the first instance. In my opinion this is wrong, uninformed, and disrespectful of Australian citizenship and sovereignty.

   The tax treaty appears to have been approved by the Australian Parliament under the misconception that it is an “all good” agreement. Many adversely impacted have tenuous ties to the US, have no money in the US, have lived in Australia for decades, and call Australia home.

   What Australian domestic policy objective is served by permitting double taxation and double compliance including on superannuation?? May I suggest that it is wrong for Australian law to allow another country to violate domestic policy such as superannuation (and other policies).

   Australia has the sovereign right to protect its citizens from unjust extraterritorial tax laws.

   A Senate Inquiry will highlight “tax treaty gaps” and form a basis for the Australian Government to prioritise revision of the tax treaty (instead of leaving this matter of Australian residents and Australian interest to the US for actioning).

   What advice do you have in initiating a Senate Inquiry? Or, how else do you suggest resident Australian citizens pursue this?

   This is a reply to a letter from Scott Morrison and provides more background: http://isaacbrocksociety.ca/fatca-and-australia/comment-page-33/#comment-7561948

   http://www.FixTheTaxTreaty.org provides further background.

   I appreciate your consideration.

   Regards, Joe Citizen
   @JCDoubleTaxed

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

10. Talkback Radio
    Call a talkback radio station to talk about RBT
    Tips:
    You will only have a minute or two on air at most, so prepare your message beforehand – two or three key points is fine – and focus on these issues. Remember you have a limited amount of time, so stay on topic and ensure you make your point.
    Be factual. Avoid exaggeration and don’t make things up – always have your facts straight.
    If you hear people on air talking about issues around RBT, use this as an opportunity to call or text.
    Use a landline if possible rather than a mobile phone and turn off your radio when you call.
    Speak slowly and clearly. Remember to breathe!
    If you are not comfortable talking on air, consider sending a text message instead.
    Some radio stations you may like to contact are:
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    ABC 891
    Adelaide Talkback: 1300 222 891
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    Website: http://www.abc.net.au/radionational/ You can find the contact details for your local regional ABC radio stations here: http://www.abc.net.au/local/

    Key facts about RBT ??

11. NEWS
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    The Facts on U.S. FATCA Seminars – Syd, Mel & Bris
    Wednesday 7 December 2016
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    The Facts on U.S. FATCA Seminars

    How will individuals and entities in Australia be impacted by the Foreign Account Tax Compliance Act (FATCA)?

    This event will bring together experts from PwC’s Corporate Tax and Global Mobility teams. The interactive presentation will give you the latest updates and practical insights into what the latest developments in global tax information reporting mean for you.

    Melbourne Event – 23 Feb
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13. Thanks for your time this week.

    It was great meeting with you to discuss the US-Australia Tax Treaty and the need to remove double taxation on US citizens. As you said the purpose of the treaty is to eliminate double taxation—so it’s an issue that definitely warrants attention.

    I’ve shared your concerns with the Treasurer and asked him for a formal written response. I will forward to you the Treasurer’s response as soon as I’ve received it.

    I will also be speaking personally to Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer to ask about any possible change to taxation arrangements re: tax on superannuation for US citizens.

    Of course I’ll also continue to update you on any developments I hear on the US-Australia Tax Treaty.

    Thanks again for your passion and commitment on this important issue and for working so hard to help your fellow US citizens.

    Yours sincerely
    Ross

    t. 07 3893 3488
    e. ross.vasta.mp@aph.gov.au
    W: http://www.rossvasta.com.au
    FB: /rossvastamp
    Insti: /rossvastamp

    VastaR-EmailSignature (2)

    P.S. – Don’t forget to visit my website http://www.rossvasta.com.au or like my Facebook page https://www.facebook.com/rossvastamp to keep up-to-date with Federal matters and community events in Bonner.

14. Two weeks ago I submitted a Freedom of Information request to the ATO (see my comment here http://isaacbrocksociety.ca/fatca-and-australia/comment-page-40/#comment-7737354)

    Today I received a phone call from the ATO to tell me that they were unable to find any records relating to my accounts in the FATCA data. They will be confirming this by email.

    Two weeks really isn’t a bad turnaround time.

15. New post … we’re working on a strategy and action plan for 2017. Feedback is welcome.
    http://fixthetaxtreaty.org/2016/12/21/strategy-roadmap-v1/

16. Make a comment re OUR situation and having more than one passport MILLIONAIRES / NOT Steve Kroft reports on citizenship https://www.facebook.com/60minutes/

17. HELP us duals Nice piece on passports BUT check out the unfair taxing of us regular Joes (not super rich) duels https://www.facebook.com/groups/FixTheTaxTreaty/

18. FWIW,
    from the AICPA journal ‘Tax Advisor’ http://www.thetaxadviser.com

    searched using keywords “australia” AND “superannuation”

    Interesting last sentence of the private letter ruling;
    “….Although the IRS ruled that this type of fund is considered a trust, further analysis will have to be done regarding the tax treatment of the fund in the United States. What this ruling does not answer is what the federal income tax consequences are to a person who has made contributions to this type of fund (e.g., is this trust an exempt plan under Sec. 402(b), is the trust a grantor or nongrantor trust, or what are the possible reporting requirements under the passive foreign investment company rules?).”

    See in full below:

    October 1, 2016

    ……….
    “Foreign Trusts

    Superannuation fund: In Letter Ruling 201538007, the IRS determined that a fund whose sole purpose was to provide superannuation (i.e., pension) benefits to its members and their beneficiaries and was sourced from employer contributions, employee contributions, and income from investments was classified as a trust for federal income tax purposes under Regs. Sec. 301.7701-4(a).

    The fund was organized as a trust under the laws of a foreign country (presumably Australia) to provide superannuation benefits to its members in that country. The organizing documents provided that the sole purpose of the fund was to provide the superannuation benefits to its members and their beneficiaries. The fund was a combination of employer and employee contributions, and income from investments. Under the plan documents, a party was obligated to manage the fund responsibly to protect and conserve it, and that party must provide an annual information statement as required by the foreign country’s law. The fund was also subject to an annual audit by an approved auditor appointed by the party. The members of the fund could not unilaterally assign or transfer their benefits under the fund to another person. The fund requested a ruling from the IRS that it be classified as a trust under Regs. Sec. 301.7701-4.

    Regs. Sec. 301.7701-4(a) details that an arrangement will be treated as a trust if it can be shown that the purpose of the arrangement is to vest in trustees the responsibility for the protection and conservation of property for beneficiaries who cannot share in the discharge of this responsibility and, therefore, are not associates in a joint enterprise for the conduct of business for profit. For income tax purposes, if an entity has both associates and a business purpose, it cannot be classified as a trust. The IRS concluded that the fund did not have associates that were engaged in the joint enterprise for the conduct of a business profit and, therefore, the fund was classified as a trust for federal income tax purposes.

    This letter ruling is important for the tax and reporting implications of people who hold certain retirement and investment accounts in other countries, such as Australia. The IRS’s conclusion is based on four key facts: (1) The sole purpose of the fund was to provide superannuation benefits to its members and their beneficiaries; (2) the fund was made up of employer and employee contributions, as well as income from investments; (3) under the organizing documents, a party was directed to protect and conserve the fund; and (4) the members of the fund could not unilaterally assign or transfer their benefits to another person. Although the IRS ruled that this type of fund is considered a trust, further analysis will have to be done regarding the tax treatment of the fund in the United States. What this ruling does not answer is what the federal income tax consequences are to a person who has made contributions to this type of fund (e.g., is this trust an exempt plan under Sec. 402(b), is the trust a grantor or nongrantor trust, or what are the possible reporting requirements under the passive foreign investment company rules?).

    – See more at: http://www.thetaxadviser.com/issues/2016/oct/recent-developments-in-estate-planning-part-2.html#sthash.Yxs3hEar.dpuf

19. Thanks for finding that badger. The ruling itself is available here: https://www.irs.gov/pub/irs-wd/201538007.pdf and is over a year old (these magazines can take a while to report on minor rulings like this). It was requested by the fund (possibly a SMSF?) not the fund member (employee). As it is a private letter ruling, it can’t be used as precedent by anyone other than the entity that requested it, though it is indicative of IRS thought in this area. This ruling is consistent with the commonly used interpretations of super as either a 402(b) trust or a grantor trust. As the ruling was requested by the fund, not the member, I don’t think it is inconsistent with the position that super is equivalent to social security.

20. There’s a series of posts on the Saving Clause over at fixthetaxtreaty.org:

    Part 1: http://fixthetaxtreaty.org/2017/01/12/explaining-the-saving-clause-i/
    Part 2: http://fixthetaxtreaty.org/2017/01/19/explaining-the-saving-clause-ii/

    Part 3 is still to come.

21. A little past 2 min mark Niels mentions Territorial Tax https://www.youtube.com/watch?v=-q49OaoOSVo

22. https://www.youtube.com/watch?v=LsTUZ0L7YLI

    After 3 min mark probably meetings in US re Tax issues

23. Dear President Trump: Why I’m Leaving America

    Taxes #​TaxTimeJAN 23, 2017 @ 08:52 AM 1,996 VIEWS
    Dear President Trump: Why I’m Leaving America

    Robert W. Wood , CONTRIBUTOR
    I focus on taxes and litigation.

    Opinions expressed by Forbes Contributors are their own.
    I did not write this letter. It is a blend of a number of them I have received enunciating reasons that record numbers of Americans are renouncing their U.S. citizenship. Despite the huge protests President Trump has already drawn over social issues, and despite petitions for him to release his tax returns, other reasons motivate these renunciations. They are personal to many Americans living overseas, and are issues President Trump inherits. There is some room for hope, but whether he will remedy them remains to be seen.

    Dear Mr. President,

    I am writing with a heavy heart as I prepare to give up my U.S. citizenship. My spouse too. We are not doing so to avoid paying U.S. taxes, but because we object to a system that is discriminatory and unfair to law-abiding Americans living outside the country. I hope you continue reading, as I get the sense that homelanders typically shrug off our complaints as sour grapes and tax avoidance. It is anything but.

    Taxing Passports

    It has become too expensive, too difficult, and frankly, too frightening, to try to comply with all of the tax filing requirements that now apply to U.S. citizens living abroad. With FATCA, even opening a local–but to the U.S. a “foreign”–bank account is difficult because I am American. In Canada where I live, many of us are dual U.S. and Canadian citizens. Having two citizenships comes with privileges—such as voting in both countries. It also has burdens, such as paying taxes in both countries. Up to a point, that is OK.

    Notably, despite our U.S. status, many of us do not receive U.S. Social Security or Medicare. That means we take nothing from the U.S. Yet, we now feel like second class citizens or even criminals. For many of us, including many dual U.S. and Canadian citizens, taking on another citizenship, was not disloyal to America. In some cases, job requirements make a second citizenship either required or a good idea.

    But whether or not Americans abroad acquire a second citizenship, living abroad subjects us to burdensome tax and disclosure rules and unfair retirement account treatment by the U.S. The FBAR forms we must file every year, detailing the amount in every single financial account we have, from savings to checking to investment to retirement accounts, are filed with the Financial Fraud Division of the U.S. Treasury Department. The message given here, along with the enormous fines for improper filing, make U.S. citizens feel like they are guilty until proven innocent.

    Simple investments such as mutual funds, easy for those living in the U.S., are not easy for Americans abroad. Unless we are very careful, we end up with funds classed as foreign by the IRS. The taxes and compliance can be excessive. Banking and retirement accounts rules are truly discriminatory for U.S. persons abroad. Some retirement accounts abroad are still taxed by the IRS, even though they are held for retirement.

    Even a Canadian mutual fund is treated far different than an American one. These are not funds that are investing in terrorist activities in the Mideast. These are funds that are invested heavily in U.S. bonds and U.S. companies, as well as in Canadian bonds and companies. The IRS considers Canadian mutual funds as “foreign investments“, they are local investments for those living in Canada.

    American citizens living abroad are at a distinct disadvantage in planning and saving for our retirement. What have we done to deserve this discriminatory and second class treatment? Some costs and inconveniences are to be expected. Filing taxes in multiple countries means extra professionals and extra expense. But how much extra is fair?

    The broader context is America’s global tax system and FATCA, which has also made life difficult for U.S. persons abroad. This is especially true when it is the Fraud Division that investigates even the most innocent errors in filing some of the necessary forms. Today, the overall burden and the unfairness have become too heavy to reasonably bear.

    There are approximately one million Americans living and working in Canada, and millions more in other parts of the world. We are not alone in taking the previously inconceivable step of relinquishing our U.S. citizenship. What a sad state of affairs for America.

    Regretfully yours,

    A Canadian–and American

    http://www.forbes.com/sites/robertwood/2017/01/23/dear-president-trump-why-im-leaving-america/#e2441e544a23

24. I live in Australia rather than Canada – but otherwise I could have written this letter. Our retirement accounts (superannuation) are equivalent to social security and should probably be exempt from US tax under the tax treaty and the Social Security agreement – but most US tax professionals have treated them as employer pensions (402(b)), so now that’s what the IRS seems to expect. Similarly, I don’t think Congress had long-term expats in mind when the Passive Foreign Investment Company rules were passed in 1986. There is no policy reason (other than forcing expats to “Buy American”) for treating RETAIL mutual fund investments as PFICs. Indeed, until about a decade ago, I don’t think anyone reported these investments as PFICs – then some “conservative” tax professional decided that this was the “safe” interpretation, and now this is what the IRS expects.
    Between retirement accounts, PFICs and FATCA, the US has made it nearly impossible to live a middle-class life as a US citizen outside of the US.
    Top CommentREPLYFlagPermalink
    Robert W. WoodAUTHOR
    Robert W. Wood 8 hours ago
    Thank you. Yes, I agree, and arguably, the superannuation problem for Australian-Americans makes you much worse off than most U.S.-Canadians. Between that and PFICs, you are indeed between a rock and a hard place.

25. SEE ORIGINAL POST ON ARTICLE

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