FATCA and Australia – Part 1 of 2

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

1. RBT Congressional Call Storm happening on Thursday June 15th – during which we hope that Americans across the world who support RBT will blitz Capitol Hill with calls demanding support for this important reform.

   https://d3n8a8pro7vhmx.cloudfront.net/democratsabroad/pages/4683/attachments/original/1496739236/RBT_Campaign_In_A_Box.pdf?1496739236

2. May be worth highlighting in regard to big RBT push/ CONGRESSIONAL CALL STORM – THURSDAY JUNE 15!

   Write to your representatives (the easy way)
   https://democracy.io/#!/

   RBT Congressional Call Storm happening on Thursday June 15th – during which we hope that Americans across the world who support RBT will blitz Capitol Hill with calls demanding support for this important reform https://d3n8a8pro7vhmx.cloudfront.net/democratsabroad/pages/4683/attachments/original/1496739236/RBT_Campaign_In_A_Box.pdf?1496739236

3. Remember the answer to submission to Finance Committee made YEARS ago ?

   Section F. Overseas Americans

   According to working group submissions, there are currently 7.6 million American citizens living outside of the United States. Of the 347 submissions made to the international working group, nearly three-quarters dealt with the international taxation of individuals, mainly focusing on citizenship-based taxation, the Foreign Account Tax Compliance Act (FATCA), and the Report of Foreign Bank and Financial Accounts (FBAR).

   While the co-chairs were not able to produce a comprehensive plan to overhaul the taxation of individual Americans living overseas within the time-constraints placed on the working group, the co-chairs urge the Chairman and Ranking Member to carefully consider the concerns articulated in the submissions moving forward

4. https://www.finance.senate.gov/imo/media/doc/The%20International%20Tax%20Bipartisan%20Tax%20Working%20Group%20Report.pdf

5. The fact is that the minnows-caught will net zero.

   To stream-line+ RBT.

6. New post up at Fix the Tax Treaty: http://fixthetaxtreaty.org/2017/06/19/investment-constraints-1/

   It’s the first in a series about how US tax laws constrain investment choices for US taxpayers living in Australia. This post is about superannuation.

7. Re / RBT write in to congress Interesting answers received so far DO NOT cover issues highlighted in letter sent to officials. Retirement funds /house sale etc. Just a generic response re Tax is an important issue etc

8. Keith Redmond shared a link.
   11 hrs
   Please contact Alison STEIL, Deputy Chief of Staff to Speaker Ryan, at allison.steil@mail.house.gov. Put in the subject line: Americans Overseas Request Territorial Taxation for Individuals. Tell her (and Speaker Ryan) your story and how the current system of Citizenship Based Taxation hurts the US economy and American interests. You MUST angle the e-mail in this way in concert with your own personal financial damage as a result of CBT. Be respectful but insistent.
   Keith
   P.S…
   See More

   Ryan promises to overhaul tax code this year despite hurdles
   WASHINGTON — House Speaker Paul Ryan is promising to overhaul the tax code by the end of the year despite political divisions among Republicans and a…
   PBS.ORG

9. Yes now fix US taxing money earned here / https://fairtax.gov.au/?gclid=Cj0KEQjwkN3KBRCu2fWmy9LLqN4BEiQANP9-WuWwYCFR8YWarzd7u5AOkIwt0Ck70G5KbJ4G07JvymMaAmFo8P8HAQ

10. New post up at fixthetaxtreaty – http://fixthetaxtreaty.org/2017/07/31/plan-to-succeed-part-ii-strategy-roadmap-action-plan/

    We have been developing our action plan, and this post contains our strategy roadmap. As always, feedback is welcome – either comment on the post, or in our FB group, or here.

11. Especially for AU/US duals these are great sites re our predictiment.Information shared may be interesting to all Expats

    https://www.facebook.com/groups/FixTheTaxTreaty/

    http://fixthetaxtreaty.org/

12. Australian interview /Estate Tax/ US house sale/ R U a US citizen / Australian banks FATCA 35,000 names / ? divorce / https://soundcloud.com/accountants-daily/think-you-know-your-clients-citizenship-status-think-again

13. New post up at fixthetaxtreaty.org on business ownership structures: http://fixthetaxtreaty.org/2017/08/19/investment-constraints-4-structures/

14. Just found this article. Thought is was interesting about Rebekha Sharkie MP, member of the NXT Team.

    “We came over here when I was a year old in December 1973. My dad was a Ten Pound Pom and my mum is American.”

    http://www.news.com.au/national/federal-election/new-mayo-seat-member-rebekha-sharkie-explains-how-she-got-drawn-to-politics-and-became-an-nxt-mp/news-story/721762a1318dbdbbee19fa4f829997e9

15. @ John – I’ve seen no indication of whether her mother lived in the US long enough to be able to pass US citizenship on to her daughter. This question should be asked.

16. An interesting article in the Australian Financial Review today – http://www.afr.com/news/policy/tax/tax-residency-rules-are-broken-anachronistic-unwieldy-20170818-gxz15j (don’t know whether the paywall extends outside of Australia – but in case it does, here’s a pdf)

    It appears that the current rules as to who is tax-resident in Australia are too subjective and there’s a push to move to a strict day-counting rule (183 days in Aus and you’re taxed as a resident).

17. https://youtu.be/U9ca1h18q4Q

18. Reported “changed analysis on Australian Superannuation”, September 13:

    http://intltax.typepad.com/intltax_blog/2017/09/withdrawal-of-prior-blog-post-regarding-australian-superannuation-funds.html

    …
    Some of our notes from reviewing the SGAA include:

    Section 16 of the SGAA imposes a tax (referred to as the “superannuation guarantee charge” or “SGC”) of 9% “on an employer’s superannuation guarantee shortfall * * * .”

    The employer’s superannuation guarantee shortfall is comprised of “individual superannuation guarantee shortfalls.” Sec. 17 SGAA.

    Individual superannuation guarantee shortfalls are computed as 9% of wages paid to each employee, with a maximum contribution base. Sec.s 15 and 19 SGAA.

    The Australian tax is generally required to be paid quarterly, and interest accrues if it is not paid in a timely fashion. Sec.s 46 and 49.

    The amount of the tax collected by the Government of Australia generally must then be paid by the government into complying superannuation funds for each “benefitting employee.” Sec.s 63A and 65 SGAA.

    In practice, the tax is not collected, and in practice the government does not directly fund employee superannuation funds. Instead, the law provides that the 9% tax is reduced to the extent the employer “contributes for the benefit of an employee to a complying superannuation fund * * *.” Sec. 23(4) SGAA.

    Under these circumstances, one might argue that Australian employers are effectively acting as agents of the Government of Australia, and that the government is, in substance, collecting the tax and then paying the amounts into the employee superannuation funds.

    To be clear, we are not concluding that contributions into or distributions out of Australian superannuation funds should be taxed as social security under the Australia-U.S Income Tax Treaty. Instead, we are merely indicating that our prior blog post, suggesting that superannuation guarantee was not paid by the Government of Australia, was based on an incomplete analysis.

19. Thanks for that link, @Calgary411. Very useful.

20. Ta Thanks

21. From taxreform@republicansoverseas.com

    Thank you for supporting the efforts of Republicans Overseas to ensure that our proposal regarding Territorial Taxation for Individuals is included in President Trump’s tax reform initiative.

    Mr. Solomon Yue, Vice Chairman and CEO of Republicans Overseas, will personally deliver your letters to the White House in early October

22. Superannuation Tax Treatment: Our response to some great arguments

23. They have addressed some of my issues with their earlier video, but not all. And they come off as scaremongering more than usual as well.

    Here’s what I posted on FB:

    * They make a big deal of the fact that super is not mentioned in Article 18. The original treaty was written before superannuation existed – which is why super is not mentioned in 18(2) – this clause should have been amended in the 2001 protocol (treaty malpractice anyone?), though in 2001 super was still relatively minor (the median super balance in 2000 was A$10,200)

    * They describe the employee trust treatment as painless, but did not acknowledge that it involves including contributions in US taxable income as received, and that it means that a portion of withdrawals are US-taxable during retirement – which may extend beyond the expiration of FTC on Australian tax paid before retirement (with super tax free here after age 60, very few retirees are paying Australian tax)

    * They did not consider the treatment of super by the Social Security administration (having super means SS benefits will be reduced under the Windfall Elimination Provision)

    Other issues I raised, but they did not address were –
    *I asked how they treated the income tax paid inside the super fund for contributions (and investment income).
    *Some preparers include the change in the value of the account in US income currently if the employee is “highly compensated”. This is essentially treating the “plan” as discriminatory due to regulations that disregard any non-US persons when computing what percentage of the contributions go to highly compensated individuals. For large plans, this is probably incorrect as the plan will have other US taxpayer members.

    Finally – if you’re going to take the employee trust (402(b) plan) interpretation, I’m not clear on which FTC bucket you use up with withdrawals. Are they general income because they’re a retirement plan funded from employer contributions? Or are they passive income because they essentially represent investment income? This will make a difference in how much FTC carryover is available during the first 10 years of retirement.

24. September 28, 2017

    President Donald Trump
    1600 Pennsylvania Avenue NW
    Washington, D.C. 20500

    Honorable Donald Trump, President of The United States of America

    I am an American citizen living in Australia.

    Mr. President, I ask your assistance to:

    1. End Un-American U.S. policies undermining U.S. Persons Living Overseas.
    2. Adopt Territorial/Residence Based Taxation for INDIVIDUALS!

    In my opinion, the claim of double tax jurisdiction over U.S. persons tax resident overseas (as if they were also residents of the U.S.) is worse than England’s unreasonable claims on the American Colonists in the 1770s. The Colonists received some local services in exchange for the taxation.

    The obligation to overlay the 76,000+ page U.S. tax code on top of the Australian tax code is far worse in terms of complexity, cost, limitation on financial planning, and threat of penalty for not complying compared with the relatively simple taxes that King George III stamped on the Colonists.

    As a decades long resident of Australia, I nor any U.S. persons here receive U.S. resident services from the U.S. Government such as for infrastructure, food stamps, unemployment, etc. Nor does the U.S. provide for the protection of property or individual rights within Australia. U.S. Consular services are provided on a fee basis. Government services are provided in Australia by the government of Australia to which I pay a fair share of tax.

    The U.S. claim of tax jurisdiction over residents of Australia, as also residents of the U.S., is not justified.

    IMAGE: https://twitter.com/JCDoubleTaxed/status/913358514407350273
    ​
    Mr. President, Founding Father Samuel Adams referred to the British imposition of taxation on the Colonies as Tributary Slavery. In 2017, the U.S. tax and compliance laws obligated of U.S. Persons overseas represent, in my opinion, modern day tributary slavery via unjustified one-way taxation, without services or a care for one’s well-being, with unfathomable compliance complexity and cost far greater and more nettlesome than for Mainland Americans with similar financial circumstances.

    Additionally, The double tax claim represents U.S. intervention into the internal affairs of Australia, is wrong, and should stop. The U.S. is not justified to upend benefits of the Australian mandated retirement vehicle called superannuation for Australian residents.

    In a 09.07.17 video by IRS Medic, up to 4 U.S. forms were noted as required to report an Australian resident superannuation account. There is a threat of a $10,000 fine for each missing form, or up to a $40,000 fine. A missing FBAR form (to the U.S. Financial Crimes Enforcement Network – note, assumed guilty already!) may attract a fine potentially up to 50% of the account balance if greater, even if no U.S. tax is owed. These fines are per each year if not reported.

    Resident Americans don’t live under such threats and compliance obligation for their retirement accounts. The Equal Protection Clause – 14th Amendment – is missing in action. Unreasonable Fines Clause – 8th Amendment – missing in action. Unreasonable Search and Seizure – 4th Amendment – missing in action. Plus others.

    The Australian – U.S. Tax Treaty is unfair for Australia, for Americans living in Australia, and for Australians living in America. The treaty should be revised.

    The U.S. tax code does not recognize Australian tax paid on superannuation contributions and along the way (in the form of tax credits) as superannuation is designated a nonqualified pension fund under U.S. rules, and the U.S. does not tax U.S. based nonqualified pension funds that way on contributions and along the way. The Australian tax code and tax treaty does not recognize U.S. tax paid on superannuation through tax credits, as superannuation is Australian source, and extraterritorial tax on Australian residents is not recognized. Thus superannuation represents a clear tax treaty fail with double taxation and compliance guaranteed with unreasonable threat of confiscatory penalty on top.

    The U.S. tax code is only concerned with U.S. definitions including of social security, and obliges fitting its definitions and tax overlay on the social security systems and tax laws of other nations. Thus the U.S. tax code is inherently disrespectful of other countries, especially for residents of those countries (Canada and a few other countries have some exemptions for their retirement vehicles in their tax treaties, yet there are many examples of double taxation. For instance the Canadian RDSP disability savings plan gets double taxed even on Canadian government contributions, while the family of a mentally disabled Canadian may not renounce U.S. citizenship for this person, under U.S. law – a famous story of injustice: http://www.isaacbrocksociety.ca/2015/04/16/we-delivered-monumental-submission-to-senate-finance-committee-fight-cbt/ ).

    The tax and compliance difficulties of being an American resident overseas have been the subject of numerous submissions to the Senate Finance Committee, submissions to the House Ways and Means Committee, letters to Congress, and news articles for many years. Until now there has not been a response and only a tendency to add to the laws, forms, and penalties on Americans living overseas. To me this lack of government response over years illustrates that the Washington system of government is broke. The needs and requirements of government are elevated too far above “we the people.”

    Republicans Overseas backs a lawsuit that FATCA and FBAR, burdensome potentially career limiting over-regulation for U.S. persons overseas, are unconstitutional on 8 claims. RO persists yet have had a recent setback in the 6th Circuit Court. The standing requirement was deemed higher than for Roe v Wade where for FATCA and FBAR coercion was not recognized on a 3rd party. I am referring to the coercion of the Obama one-way FATCA law with threat to other nations and their banks to comply else face 30% “withholding” on all U.S. source payments. Even the courts appear stacked against Americans Overseas.

    Mr. President, you may help via Executive Order. I don’t see this included in RO proposals: Please implement an Executive Order for U.S. persons overseas that includes prohibition of U.S. financial institutions from discriminating against U.S. citizens because they have an address in another country. Big names such as Fidelity and Schwab drop or deny accounts.

    Mr. President you may direct the Treasury to change a few laws. The tax code and other laws authorize the Treasury to exempt classes of people from certain reporting requirements as it wishes. For example, it could exempt non-resident citizens from FATCA, FBAR, PFIC and form 3520. This does not require legislation. Treasury may also change the cost of citizenship renunciation back to $400 or $0 from $2,350 currently against people who have felt forced to renounce citizenship because of U.S. extraterritorial over-regulation. Can we change the regime that punishes victims of over-regulation to policy?

    You may end Obama’s Executive Order on FATCA IGA “agreements” with other nations. FATCA compliance requirements and threat of bankrupting penalties for noncompliance have prompted financial institutions in other countries to discriminate against Americans (most notably in Europe), closing or denying accounts including mortgages. Democrats Abroad published a survey result highlighting FATCA impacts entitled: FATCA: Affecting Everyday Americans Every Day. The minnows – everyday people – bear the consequences, the compliance industry profits, while the tax cheats are long gone.

    In Canada, ADCS backs a lawsuit that FATCA violates the Canadian Charter of Rights that prohibits discrimination based on national origin – against financial institution discrimination for collecting private information, more than is required of banks in the U.S., singling out Canadian residents who are also U.S. Persons (~ 1 million of the population of Canada). That will be an interesting time when the lawsuit claim is validated by the Canadian Supreme Court. Will the U.S. then say to Canada only the U.S. can have a Bill of Rights, our U.S. law will not recognize the legitimacy of Canadian legal Rights for your citizens resident in Canada? Australia is behind in this area with no equivalent to the Bill of Rights.

    Legislation is required to remove “citizen” from the tax code. This will have the affect of shifting to Territorial/Residence Based Taxation for individuals. Here is a blueprint by Heitor David Pinto: https://drive.google.com/file/d/0B7VqDyDIAgW2SVZPSE1aX0xoZzg/view

    Mr. President, in your recent speech to the U.N. you said that you would put America first, and expected the leaders of other nations to put their nations first. Such statement ignores the steamroller represented by the U.S. Treasury in FATCA IGA and Tax Treaty negotiations along the lines of “my way or the highway.” Thus, in my opinion, America via the U.S. Treasury has demonstrated deep disrespect for other nations including America’s closest allies and relatively higher taxing countries, treating Australia, Canada, and the U.K. and others as tax haven countries.

    While the U.S. Treasury was out to block the minuscule chance and numbers of people using Australian superannuation accounts for U.S. tax evasion, it has dismissed the possibility and fact that the vast majority of accounts, especially for Australian residents who are U.S. persons, are legitimate social security/retirement saving vehicles legal under the laws of Australia.

    Australia has right as a sovereign nation to exempt U.S. extraterritorial law on Australian soil via proper tax treaty exemptions ( FixTheTaxTreaty.org ). The U.S. Treasury lacks authority to disrespect this Australian sovereign right. The whole process of tax treaty revision is an arcane decades long process with highly limited flexibility for tax law changes of either country. Superannuation has been around for a few decades without exemption.

    IMAGE: https://twitter.com/JCDoubleTaxed/status/913359523368144896

    My sense is that Australian government officials feel helpless in the path of the U.S. Treasury steamroller. A letter responding to double taxation concerns from the Australian Treasurer states that he suggests referring this [Australian sovereign matter!] to the U.S. in the first instance, for Australian residents who vote in Australia and for who their closest “representatives” are in Australia.

    There is also confusion and misconception stemming from the unfathomable complexity of it all. One senior Australian Minister had difficulty explaining the transition to retirement provisions of superannuation. If this person can’t explain superannuation for Australians only, the U.S. tax overlay will be inexplicable with contemplation of double tax remedy unfathomable.

    Is an Executive Order needed to help countries negotiate fair tax treaties with the U.S. Treasury?

    I placed INDIVIDUALS in all caps as the focus on “territorial” taxation has been all on companies thus far. While a shift to territorial taxation for companies will level the playing field for American companies to better compete internationally, American companies currently have a much better deal internationally than American individuals, in my opinion.

    While all nations where U.S. Persons live are treated as tax havens for individuals with a multitude of penalties threatened for everyday accounts and financial planning products legal under the laws of those countries, companies get a “gold pass” on “Double-Dutch Sandwich” profit shifting schemes. For individuals income shifting does not work as it is all taxable by the U.S. and for individuals there are tight limits on deductible expenses. Some U.S. deductions for individuals, such as interest deduction on a loan for a personal residence, are not recognized by Australia. Thus there are fewer U.S. individual deductions that may be realized by Australian residents than allowed for U.S. residents.

    Today companies don’t have to pay U.S. double taxation on income overseas until the money comes back to the U.S. This is not so for individuals.

    Additionally, the double compliance on entities and individuals overseas is incredibly complex and this favors companies who may have dedicated compliance units to deal with it. Individuals by definition don’t have their own compliance units to sort out compliance that appears to have been devised assuming that expert advice is at hand, or without concern for compliance costs inflicted in time and money. Experts such as FATCA architect Elsie Bean, at the recent Congressional Hearing on consequences of FATCA Chaired by Honorable Rep. Mark Meadows, got FATCA and Expats wrong in 15 areas, according to IRSMedic. If tax and compliance is so complex that politicians and experts can not get it right, what hope do INDIVIDUALS have?

    The U.S. Constitution starts with “We The People.” This cornerstone of America suggests that INDIVIDUALS should have priority over corporations. “Corporations” are not mentioned in the Constitution. Don’t forget the people.

    The current practice of double taxing Americans overseas has been called, uncomplimentarily, “life control.” There is a constitutional lawsuit against it all brewing from this direction, from ADCT: http://citizenshiptaxation.ca/the-issue/

    I refer to Republicans Overseas on the facts that a shift to Territorial/Residence Based Taxation for individuals will be tax-revenue positive.

    Mr. President, in summary, your assistance is requested to:

    End Un-American U.S. policies undermining U.S. Persons Living Overseas

    Adopt Territorial/Residence Based Taxation for INDIVIDUALS!

    Direct Treasury to allow Australia and other nations to exempt from their soil U.S. extraterritorial tax and compliance law on INDIVIDUALS, in revised tax treaties.

    All would help remove the undermining disadvantage of U.S. over-regulation on U.S. Citizens living in another country, and help Americans spread American values, influence, business, and trade globally.

    MAKE BEING AN AMERICAN GREAT AGAIN [for the 9 million Americans resident overseas] !

    Thank you for your consideration.

    Most respectfully,

    JC
    @JCDoubleTaxed

    The author will post this letter on the web and provides consent for reprint.

25. Another interesting article in AFR
    http://www.afr.com/news/policy/tax/australia-to-lose-projects-to-the-us-if-trump-tax-plan-goes-ahead-20170928-gyqaix
    Heres the extract
    Former US ambassador Niels Marquardt, who is now chief executive of the American Chamber of Commerce in Australia, said territorial treatment of companies should extend to individuals. That is, both should only be taxed in the US on money earned in the US.
    “Moving toward a territorial system for both corporations and individuals will eliminate some enormously punitive impacts for both Americans and Australians paying US tax,” he said

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