Dealing with Australian Superannuation has come up frequently at Brock, sometimes on the FATCA and Australia page and sometimes on various other threads.
JakDac suggested we have a post for this specific topic, so people can post helpful information (or ask questions) on Superannuation in one location, so people won’t have to search throughout the site.
We’re kicking it off with a text by JakDac, who asks that you remember these are suggestions, unless verified.
“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)
“You might note the gift allowance to non-US spouse of $145,000k per year to help move money around Should WE be doing this ?
“Australian dividends. The US does not recognise Australian franking credits. May best in non-US person name.
“All not double taxation prevented.
“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and industry funds, and many retail funds), then contributions are taxed, but income inside the fund is not taxed until withdrawn.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 favourable.
April 13, 2016 at 10:51 pm
‘@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.’ ”
United States Senate (“Senate”) to approve the bilateral income tax treaties
DO NOT forget AUSTRALIA (AU pension “Superannuation” not following current US Tax Treaty model for over TWENTY THREE years
Let them know
JakDac – those treaties are being blocked because of their information sharing and privacy concerns. See this earlier article by Jim Jatras in Accounting Today: https://web.archive.org/web/20170129002001/http://www.accountingtoday.com/news/rand-pauls-stand-against-tax-treaties-is-more-important-than-you-think
And – approving the bilateral treaties currently before the Senate is unlikely to have any bearing on the timing for renegotiating the Australian treaty – which is not yet on the radar.
Nice to hear
Many supporters of FATCA reform also take exception to the U.S. policy of Citizenship Based Taxation. Democrats Abroad has launched a campaign to overturn Citizenship Based Taxation and replace it with a policy of Residency Based Taxation.
The United States is the only country aside from Eritrea that taxes its citizens on their worldwide income regardless of where it is generated, no matter where they live, no matter how long they’ve lived there and regardless of whether they face taxation on that same income in their country of residence.
Democrats Abroad supports Residency Based Taxation or RBT, a system of taxation in which a nation imposes tax on income generated within its border. Citizens of a nation with Residency Based Taxation pay tax on income in the place where the income was generated. If they live and generate income abroad then their offshore income is taxed abroad and not taxed by the nation of their citizenship. Only income generated within their nation of citizenship is taxed by their nation of citizenship.
For the first time since the 1980’s Congress has turned its attention to comprehensive tax reform. Democrats Abroad, in collaboration with the other organisations representing Americans abroad, believes we have an opportunity to influence the process by campaigning for Residency Based Taxation to be included in Congress’s package of tax reforms.
This week we launched the attached Residency Based Taxation – Campaign in a Box for use by Americans interested in adding their voices to the cry for Residency Based Taxation. It includes information about the campaign and advice about the multiple ways you can participate in it.
We draw your attention especially to the 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.
Thank you for your attention.
Please contact me with questions, comments or to be removed from the FATCA Reform Campaign Distribution List.
Many thanks again,
on behalf of the Democrats Abroad Taxation Task Force
Ms Carmelan Polce
Chair, Taxation Task Force
M: +65 9380 1084
Interview with CNBC
David McKeegan has informed
that he has discussed a lot about Taxation without representation/CBT, PFICs, FATCA bank account closures, etc.
We need to see what the interviewer writes/prints but it could be good.
David Mckeegan, MBA, EA founder of Greenback Expat Tax Services
He REALLY seems to be trying to help
Co-sign letter to Administration and Congress by groups supporting change from Citizenship-based to Residency-based taxation for Americans overseas http://www.prnewswire.com/news-releases/co-sign-letter-to-administration-and-congress-by-groups-supporting-change-from-citizenship-based-to-residency-based-taxation-for-americans-overseas-300460257.html?platform=hootsuite
eliminate unfair practices like taxing Aussie superannuation
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.
May be worth highlighting in regard to big RBT push/ CONGRESSIONAL CALL STORM – THURSDAY JUNE 15!
Write to your representatives (the easy way)
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
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
Keith Redmond shared a link.
Please contact Alison STEIL, Deputy Chief of Staff to Speaker Ryan, at firstname.lastname@example.org. 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.
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…
What U.S. Workers Need to
Know About Australian
Superannuation Tax Treatment: Our response to some great arguments
I replied to this in another thread http://isaacbrocksociety.ca/fatca-and-australia/comment-page-45/#comment-8005078
Join us at 3.30pm today (AEDT) for our live Q&A with Malcolm Turnbull. Ask about US/AU Tax treaty in comments. Hopefully they may get a lot of comments do it NOW please https://www.facebook.com/news.com.au/…
Another article from John Castro on superannuation:
Castro, John A. (2018) “U.S. Tax Treatment of Australian Superannuation,” Nevada Law Journal Forum: Vol. 2 , Article 6.
Available at: http://scholars.law.unlv.edu/nljforum/vol2/iss1/6