Strategy Roadmap – Rough Draft

“Give me six hours to chop down a tree and I will spend the first four sharpening the axe.”
― Abraham Lincoln

While it may seem like there’s very little activity here, we have been busy behind the scenes. The Steering Committee (myself, Carl Greenstreet, and Caroline Day), have been working on articulating our strategy. We have a very rough draft of our initial strategy roadmap that we are now releasing for comment. There are still many holes to fill – the table of contents shows an outline of where we’re heading.

Previous blog entries have discussed our overall vision. Carl’s Plan to Succeed post foreshadowed much of the structure of the current document. In Priorities I outlined several main goals which have been incorporated here. And in One Step at a Time I talked a bit about the long time horizon that may be necessary in our struggle. The governance section of the document comes mainly from my Steering Committee post. The Strategy Roadmap pulls all of this information into a single document.

This is a first draft. Your comments and suggestions are needed to assist with refining the current document and extending it. Getting the strategy right is an important first step. As the old proverb goes: “What’s the use of running if you’re not on the right road?” You can make comments here, on the Facebook group, or by completing the feedback form on the About page.

Comments will help us develop a coordinated action plan for 2017. We look forward to your feedback, and will be calling for assistance from everyone as our plans for 2017 take shape.

I’d like acknowledge Carl’s efforts in putting together the initial outline that became this first draft. Fleshing out his outline has been a group effort. If you are interested in joining the Steering Committee to help with further refinement of this document, please fill in the form here.

Download the document here: FTT Strategy Roadmap

19 thoughts on “Strategy Roadmap – Rough Draft”

  1. Karen, I’ve read the rough draft of the AU/US tax treaty and the only thing that i could think of is maybe to pass a copy to both the Australian Prime Minister and the American President Elect Donald Trump. who knows maybe they will help in our endevour to fix the broken taxation system.

    1. Thanks for your feedback, anna. We’ll be considering the best way to get our message to Turnbull and his government. Figuring out who would be most receptive to listening to our problem and most able to actually do anything is our next step. While I agree that it is important that the leaders of both countries be aware of the problem, I suspect change will come from lower down in the bureaucracy.

  2. This plan is coming together beautifully. Kudos to all who are working on it.
    Page 4 — Would you consider listing green card holders too? Australians returning home many years ago might not have known about the US exit procedure and just stopped filing US taxes without ever returning the card.
    Page 8 — Key Goal #2 — This was brought up in a government committee prior to FATCA implementation in Canada. Sadly it fell on deaf ears. I hope Australian MPs are better listeners than ours.

    1. Thanks for the feedback. Re – green card holders, yes we should have thought of that. And on restricting the reporting to non-residents – if you don’t ask for something, there’s no way you’ll get it. It’s good to hear that you asked in Canada. I’m hopeful that, with the lack of reciprocity on the US side, our government might be ready to listen.

      1. Absolutely go for it! There’s more awareness now than back in 2014, so hopefully there’s a better chance your legislators will listen. Most of ours were clueless. Best wishes to you and your team.

  3. Getting rid of the “savings clause” does not provide exemption from U.S. double taxation.

    The language of the treaty has misled Australian Government officials that the treaty is all about preventing double taxation. The U.S. Treasury Department definition of “preventing double taxation” is in itself part of the double tax problem. For The U.S. Treasury the definition of “preventing double taxation” is paying no higher tax than the highest of the two countries (with country of residence with first right to tax) in the case of U.S. persons living in Australia. (No mention here or exemptions from U.S. tax code penalties for Australian resident or “foreign” assets, accounts, and trusts, which is in and of itself a direct form of double taxation that the Australian government should not ignore).

    The definition of “preventing double taxation” should be along the lines of residence based tax (and common sense): you live in Australia, you pay tax to Australia, then there should be no further tax to pay to the U.S. (especially if all of one’s earnings/assets are in Australia). The Australian Government has a sovereign right to insist on such definition for its resident citizens (and not cave in to the U.S. tax treatment of: American residents living in Australia, as if Australia is the 51st state of the U.S. and as if these Australians actually live in the U.S. with limited exception of the Earned Income Exclusion)!

    1. True – removing the savings clause may not remove the requirement for US citizens to file US tax returns, even when resident in Australia. However, if US citizens are able to take advantage of the rest of the treaty, then they may be able to take advantage of the article defining residents, which should allow them to be treated as non-residents for at least some parts of the US tax code (anywhere the code doesn’t reference “residents and citizens”), plus they will be able to take advantage of any treaty provision that says that the resident or source country has the sole ability to tax a given item of income.

      We’re focusing here on what the Australian government can do to protect its citizens and residents – there’s not much we can do in Australia to fix the US tax code itself; but US citizens resident in Australia should be able to lobby the US government for change there. As long as the US is taxing non-resident citizens, I don’t think any tax treaty can completely avoid double taxation of US citizens residing in Australia. But Australia should be able to draft a treaty that substantially mitigates the problem. (Getting the US to agree is another issue)

  4. To me, the taxing of capital gains on the sale of the Primary Residence is just as high priority as the PFIC treatment. HIGH priority, not Medium.

    1. Why should Australians be taxed on their main residence? We never pay capital gains on our primary residence it’s always been exempt so why does the US want to tax us on our homes? This worm hole keeps getting deeper and deeper and it doesn’t look good. Looks like i’m one of the Accidental Americans through Marriage.

        1. Anne – if you plan to sell your house while a US citizen, get professional advice. You may be able to gift your half of the house to your husband before the sale. You would have to file a gift tax return, but could use your $5.5m unified credit to avoid actually paying gift tax. But – before trying this, get professional advice!!!

          1. Thanks, Karen. I will be getting professional advice for sure. I do think the primary residence is a big issue though, especially in the “hot property” cities, where home prices have shot up exorbitantly.

      1. This is just another example of the problems that come up when a country taxes non-residents under the same rules as residents. If you’re a US-resident taxpayer, then you get a deduction each year for the interest on your mortgage. When you sell your principal residence, you pay tax on the capital gain (but only to the extent it exceeds $250,000 per taxpayer). If you’re a US expat, they apply exactly the same rules. But, you don’t really get a benefit from the mortgage interest deduction if it isn’t allowed in your home country (it doesn’t reduce your home country tax, so in effect all the deduction does is increase your foreign tax credit carryover). Then when the expat sells their principal residence, the US treats them as a US resident and taxes the gain (computed in USD, so best to sell when your home currency is low relative to USD).

    2. Thanks for your feedback, Anne. The committee will discuss that when we meet. If anyone else wants to put in their 2cents regarding priorities, we would love to hear it.

  5. Superannuation is going to be a big deal for me has anyone had any attempt to get a smf except from fatca? And if they have who helped I’ve talked with a few tax accountants for expads and they say no? Can we get the superannuation industry involved?

    1. Thanks for your comments, Don. Superannuation is one area where I am hopeful of success. I believe that most tax preparers are treating it incorrectly, and the IRS has come to expect this incorrect interpretation. Superannuation is equivalent to social security. Under the tax treaty, social security (or the equivalent) is taxable only by the source country (Australia for superannuation). There are several articles and comments on this site that explain this position.

  6. With respect to ‘gifting’ 1/2 of your principle residence to yoor spouse. Absolutely a good idea if required to be under the threshold for covered expatriate status. ( 2 million USD) . Very very very few people residing outside the US would bother with a gift tax return. Who is to know?

  7. To: The Steering Committee of Let’s Fix the Australia/US Tax Treaty!

    I believe it important for this group to define “double taxation.” The definition needs to be separate from the language and interpretation of the existing tax treaty. It must be made clear that the tax treaty does not prevent double taxation.

    Furthermore, I suggest that a statement on the justification of taxation would advance our aims. Such a statement will underpin assertions of when a government is justified and when it is not justified to tax Australian residents. When a government claims tax jurisdiction such claim comes with government obligations to those taxed. This fits in nicely with our position that the Australian Government is obligated to act to remedy the tax treaty.

    I submit these two section drafts to precede the sections outlining various tax treaty gaps.

    Double Taxation

    Double Taxation is the levying of tax by two or more jurisdictions on the same declared income (in the case of income taxes), asset (in the case of capital taxes), or financial transactions (in the case of sales taxes). 1

    While an aim of the Australian-U.S. Tax Treaty is to avoid double taxation, there is no exemption or refutation in the treaty of the U.S. claim of tax jurisdiction over Australia. Nor is there refutation of the U.S. claim that Australian residents are also “residents” of the U.S.

    In the case of Australian tax residents, who are also U.S. Persons, there is further tax and penalties required by the overlay of the 76,000+ page U.S. tax code on top of the Australian tax rules. This is beyond all tax and compliance required by Australia. While the treaty helps mitigate double taxation extra tax is guaranteed from the mismatch of the two tax codes.

    ‘Under a specific set of circumstances Australian residents who are also U.S. Persons may be subject to United States taxation on their Australian-source income and assets. These circumstances are called Tax Treaty Gaps.’ 2

    Why Does Double Taxation Represent Injustice?

    “Immanuel Kant said taxation was justified when it increased human autonomy by providing for people’s basic survival needs or for the protection of property rights.”3

    The Australian Government is justified to tax Australian residents. The U.S. Government is not justified in its claim of tax jurisdiction over Australia. The U.S. Government does not provide services for Australian residents (roads, hospitals, education, unemployment payments, etc), nor does the U.S. Government provide for the protection of property rights within Australia.

    The Australian Government ratified a tax treaty with inadequate protection of property. There is also no protection against loss of autonomy, from the complexity, U.S. penalties, and compliance burden of the overlay of the U.S. Tax code on top of the Australian tax laws.

    There is no evidence in the treaty text that the Australian government did any more than to accept the text from the United States. U.S. tax obligations representing double taxation flow through and become obligations under Australian law as represented by the tax treaty and FATCA IGA.

    The Tax Treaty incorporates tax injustice and, consequently, is flawed. The Australian Government has a sovereign right and obligation to prioritise modification of the treaty to comprehensively protect Australians from the unjustified extraterritorial U.S. tax and compliance.

    1. https://en.wikipedia.org/wiki/Double_taxation
    2. https://netorg82979-my.sharepoint.com/personal/information_adcs-adsc_ca/_layouts/15/guestaccess.aspx?guestaccesstoken=cBrQYPFDI%2fKRC6D2cx4JDUX5mGmink%2bEDDekOsZ98ks%3d&docid=0febbc4e18032452597462a04675facdf , p4.
    3. https://www.libertarianism.org/columns/kant-justified-taxation

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