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Australia’s best investment pal?

The US Study Centre at the University of Sydney, with assistance from AmCham Australia, is producing a study on Australian investment in the US (and vice versa). While there are many factors that determine whether an Australian company will locate operations or marketing efforts in the US, the tax treatment of any Australian managers sent over to the US must be part of the equation. Unfortunately, I think most Aussies moving to the US for business are completely unaware of how the US tax system will see their existing Australian financial assets — until they’re already in the US tax system and it’s too late.
 
It would be great if USSC would include even just a page or paragraph on the way both the tax treaty and the xenophobic US tax code discourage movement of managers between the two countries.
 
AmCham has a blog post that reproduces the article from the Australian (and is not behind a paywall). At the bottom of the blog post (just above the comment box) is an email link. If you’re an Aussie who has relocated to the US for business and had to deal with these issues, please email AmCham and encourage them to include individual tax issues in their study.

“Just the facts, ma’am” … Introducing the Fix The Tax Treaty Wiki!

I was once involved in a contentious activity involving a polarised stakeholder group comprised of big business, activists, regulators and government representatives.   Despite all parties agreeing to fact-based outcomes, I observed “the facts” changed depending on the party involved and decision makers were often presented with inconsistent, confusing and unverifiable information even by different members within the same faction.    At times, I was contacted by policy makers or media with questions and frustratingly could not immediately respond as the information was not at my fingertips.

The lessons I learned from this were if you want to affect change, you must gather your supporting evidence (the “case for change“) early and it must be verifiable and readily accessible.

Continue reading ““Just the facts, ma’am” … Introducing the Fix The Tax Treaty Wiki!”

How can they do that?

Have you opened a bank or investment account lately? Were you asked about other citizenships? Place of birth? Since mid-2014 Australian financial institutions have been ferreting out US Persons. At most institutions, every new account holder is asked these questions. And, if you are found to be a US Person, you must complete a form W-9 (or equivalent) disclosing your US connection and Social Security Number. This data will be sent to the ATO, who will forward it on to the IRS.

Think about that.

Private Australian financial information of Australian citizens and permanent residents is being sent to a foreign government.

How can they do that? Do they really have the authority to send private financial data to the IRS?
Continue reading “How can they do that?”

FOI Take 2

Just over a week ago, I received a message through this website from someone who had submitted an FOI request to the ATO. “Sam” expected that one of his accounts had been reported because the bank had identified him as a US Person and the balance was above the bank’s reporting threshold. The response from the ATO puzzled Sam, and it puzzled me as well. The ATO response stated that they needed to consult with a “foreign government” about whether Sam’s FATCA records were exempt from FOI under Section 33 of the FOI Act: Continue reading “FOI Take 2”

Our Stories – The Human Element

When we tell other Australians about the issues we face from the long reach of the United States, it is easy to lapse into technical speak – double tax, PFICs, NIIT, FATCA, IGAs and the like.   But the reality of the situation is something more and deeply emotional:  fear, anger, frustration and resentment are only some of the gut feelings most of us experience.

To affect positive change, we need to educate Australian policy makers and the public on the harm being inflicted on not only a large group of people but also the Australian economy.   By its very nature, this is a technical topic and our arguments require verifiable stats, well thought-out positions, identified and viable alternatives, a business case and the like.

However, like any good novel, we will stand a better chance of hooking our audience if we also appeal to them on an emotional or gut level.

This is where you come in.  Continue reading “Our Stories – The Human Element”

Explaining the Saving Clause III

This is Part 3 of our series explaining the Saving Clause in the Australia / US tax treaty. In Part 1 we saw how international tax works for 90% of the world’s population: income sourced in the country where you live is taxed only by that country. Income from elsewhere is governed by the treaty and generally taxed by the source country – with a tax credit in the resident country if it is also taxed there. In Part 2 we saw how the Saving Clause works in US tax treaties[1]: US citizens are subject to US tax wherever they live due to the unique practice of Citizenship Based Taxation; the Saving Clause allows the US tax its citizens as if most of the treaty did not exist, allowing the US to tax foreign-source income of foreign residents.   Continue reading “Explaining the Saving Clause III”

Explaining the Saving Clause II

This is part 2 of a three part series explaining how the Saving Clause works in international tax treaties. In part 1, we saw how international transactions are taxed for almost 90% of the world’s population under Residence Based Taxation (RBT). We looked at the example of Maria, an Australian resident with rental income in Santiago Chile. Maria pays tax to Chile on the rental income, but is not required to report or pay tax in Chile on any of her Australian income. On her Australian tax return, Maria reports the Chilean rental income and is able to deduct the tax paid in Chile from her Australian tax. Essentially, Chile has the first right to tax Chilean source income.  Continue reading “Explaining the Saving Clause II”

Strategy Document Feedback

Just before Christmas, Karen released our initial Steering Committee work on the group strategy for your feedback through the blog comments, our Facebook Group or Private Message.   Perhaps the timing was not the best given how frenetic things get for most of us over the holiday season? Continue reading “Strategy Document Feedback”

Explaining the Saving Clause I

When it comes to fixing the tax treaty, the “Saving Clause” is a key piece of the puzzle. From the discussion that followed the Strategy Roadmap, it is clear that many find the saving clause very confusing. So, in a series of three posts, I’m going to attempt to explain how the saving clause works and why it is important. In this first post we’ll look at how international tax works under the Residence Based Taxation model used by three quarters of the taxing jurisdictions in the world and covering almost 90% of world population, without the saving clause. The second post will look at how the saving clause, coupled with Citizenship Based Taxation changes the result. In a nutshell, we’ll see that the saving clause allows the US to tax US citizens living in Australia on their Australian source income. The final post will explore ways to fix the problem. Continue reading “Explaining the Saving Clause I”

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