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
Another post on the blog. This one links to a series of videos on the Transition Tax. http://fixthetaxtreaty.org/2018/02/13/more-on-the-transition-tax/
Karen – thanks for the link. Excellent videos!
Karen – having now watched my way through all seven of the videos, I just want to say: I’m in awe of your brain.
I have a question, which may or may not make sense depending on whether I understood your wonderful explanation or just thought I did.
The Republicans made many promises to do something about CBT in the tax bill, and then at the last moment for some reason decided they didn’t want to do anything about CBT until later.
Given that the transition tax would be added to the individual”s tax for 2017, does the transition tax depend on CBT? If CBT had been replaced by RBT, effective 2017 tax year, would that have had implications for the implementation of the retroactive transition tax, effective 2017 tax year?
Plaxy –
Thanks for your kind words.
I don’t know that an effective date for RBT/TTFI was ever stated, but I doubt it would have been backdated to the beginning of 2017. But, if it had, then the transition tax would not have applied to corporations owned by non-resident citizens. This is only a problem because the US claims the right to tax tax-residents of other countries as if they were US residents.
RO tried to get TTFI in the tax reform bill but couldn’t get it scored in time. Why? I don’t know…
Thanks Karen.
I was thinking they might not have wanted to risk a legal challenge to the transition tax by providing for the abolition (well, replacement) of CBT and pinning a huge tax on it, all in the same bill.
Interesting. Thanks again for the great explanations.
@ Karen
I’ve just about finished watching the videos you did with John and I can’t tell you how many times I’ve exclaimed “GOOD GRIEF!” already. And like plaxy I’m in awe of how well you and John understand the latest tax legislative debacle as it pertains to non-res USCs. Thank you both for doing this very educational series. If I were affected by the dubious “transition tax” I would definetly be #NotPayingThis.
Working my way through the videos.
I think it’s very important to note that for all you who think TT was not intended to apply to individuals for the specific purpose of extracting money from retirement accounts:
– they specifically defined Exactly corporations as the beneficiaries of their so-called territorial taxation. Not only that, but what specific types of corporations and what types of income are effected. In detail. But then “forgot” to define the same for TT? Really?
– No one, not even the IRS (according to the video) is mentioning anything except how this effects corporations. Ok, but are they (the IRS or lawmakers) specifically saying that it Only effects corporations.
– Ok, so they’re not saying it applies to individuals. Question: did they advertise CBT? FATCA? FBAR? FBAR applies to individuals, too. I found it under the small businesses and self-employed section (and that by accident). Does this mean it doesn’t apply to me as an individual, or that they never intended it to apply to me as an individual? Hell, no! It was the weapon to bring me to my knees after they find out about my assets with FATCA (if I had enough to make it worth those effort, or if I was naive enough to “voluntarily” let them take it by complying).
– None of these consequences were unintentional. If they were, then we would have maybe one or two laws that create problems at any one time and things would be getting fixed as time goes on. Instead we have dozens of laws in many areas, not only taxation, many aimed specifically at expats, many extremely unconstitutional, all unfair, all unjust, many are against basic human rights, and NONE have been fixed, not even the unenforceable ones (@anybody: name one “anti-expat”-law that has been repealed and NOT replaced in the last 2 decades. Please).
– The only unintended consequence was that they did not expect so many to “vote with their feet” and leave the system, even with their best efforts to stop us. And even here the problem is NOT that Americans are giving up their so sacred citizenship or a little money (as Ms. Bean said, there are enough replacements waiting in line). The problems that they cannot tax/penalize us anymore going forward, which means they lose a part of their income stream. That’s it, anything else they could care less.
Prove me wrong. show me that the US has ever done the right thing for the right reasons in any area any one time in the last 20 years, I’ve got a hat that’s looking mighty appetizing right now.
By “the right reasons” I mean not forced to do so, not paid for by a lobby, and not for otherwise devious or personal (for the lawmaker) reasons: truly because it was the right thing to do.
Sorry, one more thing (I’ve been holding back for a while)
Maybe Congress did not specifically intend for individuals to be effected, but the condors that wrote the law (do you really think that bunch wrote this? They never read it and definitely don’t understand it.) definitely did.
Come on.
The tax code is full of cross-referencing definitions (as defined by section blah, with the exception of those defined in sections blah blah), but they made two separate definitions? In one piece of law that was never subject to the possibility that one part might go through and the other not.
It would have been as easy as defining those who qualify for territorial taxation to be those subject to the transition tax, the transition tax was the price for the prize of partial territorial tax, after all.
But they didn’t, they created and entirely separate and overly broad definition. By accident?
All those here have at least had their eyes partially opened or you wouldn’t be here; open them all the way: this is no accident, just like the rest was no accident.
UnforgivenToo,
When the legislation was first released, many people contacted Congress about the discrepancy between which taxpayers receive the deduction for foreign dividends received under section 245A and which taxpayers pay the transition tax under section 965. Yes, Congress defined two separate terms here, and the final conference report confirms that they understood that. It is possible that they were given advice that there were some “planning opportunities” for individual CFC shareholders if they were excluded from the transition tax. IMO, what they should have done was shut off the planning opportunities rather than assume all individual CFC shareholders would take advantage of them.
In any event, Congress clearly did not even consider the fact that some individuals who meet the definition of CFC shareholders might also be tax-resident in other countries. To apply the transition tax to tax residents of other countries is to decide that US laws take precedence over local laws when both countries have an interest in taxing the accumulated assets of dual-residents. (Though I would argue that the US should have no such interest, it is clear that under current law the US believes it does have an interest in taxing nonresident citizens).
@Karen
The videos are good; I like how you two managed to take an otherwise dry subject and use the discussion format to make it interesting.
I see from the comment above that we basically agree that the lopsided definitions were on purpose, but maybe just disagree on the amount of lopsidedness that was intended.
I have to admit I am somewhat pessimistic about whether things will ever change to the better, much less whether a real permanent fix will ever come. Which is why I do not post very often, as not to dampen the spirits of those like you that are at least trying to get things changed. Without people like you there would be no chance at all, which is better than none.
I personally doubt they will change their direction until they are so far down that there is only the up option left, but at the rate the are accelerating in the downward direction, maybe we will live to see the international community finally have enough power and motive to finally force the US to change.
Karen – “This is only a problem because the US claims the right to tax tax-residents of other countries as if they were US residents.”
Please correct me if I’m wrong, but isn’t the retroactive transition tax only possible in its current form because the US claims the right to tax tax-residents of other countries as if they were US residents?
All of CBT rests on that counter-factual assumption. It doesn’t come up against reality, because they don’t try to enforce it. I don’t see why this transition tax would be any different. They’ve been deeming non-US-source income of USCs to be US-taxable for many years; now they’re going to be deeming non-US-source deemed income of USC owners/shareholders of CFCs to be US-taxable. It doesn’t make sense, but it also doesn’t make sense for the US to tax superannuation, or tax-free savings plans. None of it makes sense; but none of it is enforced/enforceable so it doesn’t have to make sense.
“It is possible that they were given advice that there were some “planning opportunities” for individual CFC shareholders if they were excluded from the transition tax. IMO, what they should have done was shut off the planning opportunities rather than assume all individual CFC shareholders would take advantage of them.”
That assumption appears to be the basis of the US approach to tax policy.
“A History of Controlled Foreign Corporations and the Foreign Tax Credit”
https://www.irs.gov/pub/irs-soi/historycfcftc.pdf
Detailed account of America’s long struggle to stop non-US-resident USC owners/shareholders of CFCs from claiming FTCs to avoid double taxation.
@Karen, don’t know if this is useful, but an Australian USP estate example is explored here;
https://www.thetaxadviser.com/issues/2017/dec/reporting-foreign-trust-estate-distributions-us-beneficiaries-part-3.html
from Karen on another IBS thread;
http://isaacbrocksociety.ca/media-and-blog-articles-open-for-comment-part-5-of-5/comment-page-11/#comment-8158881 https://www.brisbanetimes.com.au/money/tax/tax-fears-us-aussie-dual-citizens-provide-irs-with-details-of-184-billion-20180221-p4z12g.html
Posted this also on Fix the Tax treaty;
“Came across this https://www.bragertaxlaw.com/files/march_2016_2.html https://www.taxproblemattorneyblog.com/2016/03/brager-tax-law-group-receives-foia-documents-australian-superannuation-accounts-foreign-retirement-plans.html?utm_source=New+blog&utm_campaign=Blog+Post+Pt.+1&utm_medium=email https://www.bragertaxlaw.com/foreign-retirement-plan-account-information-from-irs.html?utm_source=New+blog&utm_campaign=Blog+Post+Pt.+1&utm_medium=email “
PS, a caveat;
I’m not endorsing the authors or services at the links I just posted. Just interested in their results of a FOIA filed with the IRS which they then made available to anyone who stumbled onto their webpages.
My letter to the editor in today’s Australian Financial Review
https://twitter.com/FixTheTaxTreaty/status/971096020238065664?s=19
I just received this email from my bank – I think everyone banking with Westpac is receiving this :
As an account holder with us, you are required to provide your tax residency status. This is an international obligation for Australian financial institutions to share this with the Australian Taxation Office (ATO).
What do I need to do?
When you next log on to Online or Mobile Banking please provide your foreign tax residency status under the ‘Services’ menu.
If you are a foreign tax resident you will be asked to:
Provide the country of tax residency
Provide your Tax Identification Number (TIN) if you have been issued one, or a reason for not providing one.
Why is this important?
This information is being collected as part of the international ‘Common Reporting Standard’ (CRS) and requires Australian financial institutions to provide the tax residency of all customers to the Australian Taxation Office (ATO).
This international agreement will help ensure international tax transparency and the exchange of financial account information between participating nations.
Thank you for banking with Westpac.
The Westpac Online Banking Team
But I think the ATO thinks you can only be a tax resident to one country:
https://www.ato.gov.au/Individuals/International-tax-for-individuals/Work-out-your-tax-residency/
So I said I was an Australian Tax Resident to Westpac.
For our Aussie friends, an update on FATCA reporting…
https://home.kpmg.com/content/dam/kpmg/xx/pdf/2018/05/tnf-australia-may15-2018.pdf
5 April 2018.
Honourable , Federal Member
Dear ,
I ask for your attention to an area impacting me – a 21 year resident of Australia – where the Australian Government is failing its obligation to protect its residents, from other nations:
The Australia – U.S Tax Treaty guarantees double taxation, so says http://www.FixTheTaxTreaty.org.
The tax treaty is Australian law.
This Australian law obliges the unjust U.S. claim that any U.S. Persons resident in Australia shall also be considered U.S. residents for U.S. double taxation purposes = the imposition of the 76,000+ page U.S Tax code on top of the Australian tax code.
This Australian law creates the following contradictions:
Contra to Australia as a sovereign nation. Australia is not the U.S. 51st state. Australian residents are not also residents of the United States!
Contra to Australian Government significant focus and expenditure on defence to protect Australian residents and way of life from outside nations.
Contra to the Australian Policy of Residence Based Taxation, which it makes exception to in the tax treaty.
Contra to “the fair go” for all Australians, by saying to a subset of the population: paying Australian tax is not a fair share, you must pay more to the U.S. on mismatches between the tax codes of the two countries and on currency fluctuations, on Australian source income, assets, and superannuation.
Contra to Multiculturalism, where Australian law obliges discriminatory double taxation on a subset of Australians.
Contra to Australian Privacy Principles, where Australia has made exception to exclude Australians from Privacy Law protections in case of an international treaty – the FATCA IGA (a bi-lateral treaty with the U.S. where Australian banks report U.S. person accounts to the ATO which reports them to the U.S. IRS. This treaty has not been reviewed and approved by the U.S. Senate). Additionally, the U.S. has no intent to reciprocate this treaty as its banks would resist the expense involved.
Contra to Superannuation savings policies, by obliging treating superannuation accounts as “nonqualified pension funds” under U.S. taxation; and attracting advice from U.S./ Australian compliance experts to put as little as possible into superannuation – which is 100% the opposite of what Australian financial advisers say generally. The situation represents U.S. intervention into the internal affairs of Australia – outside intervention into resident retirement savings policies, among others. “Superannuation” should be explicitly exempted in the tax treaty from U.S. taxation for Australian residents.
Contra to a principle stated aim of the tax treaty to prevent double taxation.
Contra to the ATO pledge of accuracy on its website. The ATO says that tax treaties prevent double taxation without any footnote of exception in regards to the Australian – U.S. Tax Treaty.
I have seen a response from the Honourable Scott Morrison on this issue. I do not agree with him that an Australian citizen resident in Australia should address the issue with America in the first instance for U.S. double taxation on Australian source. In my opinion, as Australia is a sovereign nation it is rightful for an Australian citizen resident in Australia to bring up the issue for remedy with the Australian government in the first instance. This was Morrison’s reply:
“…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.”
No Mr. Morrison, Australia is not the 51st U.S. State.
A way forward to reverse decades of neglect and tax treaty malpractice: is a Parliamentary Inquiry including due diligence into the matter. A Dr. Karen Alpert, Chairperson of Let’s Fix the Australia/US Tax Treaty!, may attend Parliament for such enquiry (admin@fixthetaxtreaty.org).
Will you help initiate a Parliamentary Inquiry into the matter, as a basis for pursuit of remedy with the U.S.?
Regards,
Response letter posted at FixTheTaxTreaty Facebook page.
There is some press about Western Australian State MP & Opposition Leader having a run in with the IRS while trying to renounce U.S. citizenship.
Press:
http://www.abc.net.au/news/2018-07-31/mike-nahan-is-dual-us-citizen-embroiled-in-tax-dispute-with-irs/10057092
https://www.perthnow.com.au/politics/state-politics/opposition-leader-mike-nahan-claims-to-be-victim-of-us-tax-grab-ng-b88915122z
Press release by Mike Nathan:
https://mikenahan.com.au/mediarelease/personal-explanation-by-opposition-leader-mike-nahan/
Pls RT/Like on Twitter:
https://twitter.com/FixTheTaxTreaty/status/1024242971162554375
https://twitter.com/ExpatriationLaw/status/1024599726790987781
https://twitter.com/JCDoubleTaxed/status/1024256763476865025
https://twitter.com/dkouba/status/1024420967567613952
https://twitter.com/CrossBriton/status/1024285789604200450
https://twitter.com/GusSwnsn/status/1024639941731606529
https://twitter.com/Keith__REDMOND/status/1024735689949306880
etc.