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More on the Transition Tax…

In January, John Richardson and I recorded a conversation about the “Transition” tax that was part of US tax reform. John’s post introducing the videos is here: U.S. Tax Reform and the “nonresident” corporation owner: Does the Sec. 965 transition tax apply?

The transition tax is the provision in the tax reform bill that concerned us so much when it was introduced that we posted a Call to Action! In short, when applied to an Australian-resident US taxpayer, the transition tax asserts the right of the US to reach inside an Australian corporation and tax previously earned active business income just because a majority of the company is owned by “US Shareholders”. This is a major departure from prior law, and calendar-year taxpayers were given not much more than a week from the date the law was signed to the end of the tax year in which this new tax would be applied – certainly not enough time to understand the new law, let alone plan to avoid the inherent double taxation. Furthermore, in all of the hearings on the bill, not one Representative or Senator mentioned anything about the applicability of this provision to corporations owned by tax-residents of other countries, for whom the idea of “repatriating” profits to the U.S. is not only absurd, but also a drain on the economy of the country they call home.

What did we learn from our ATO FOI request?

While the 2014 FATCA information transfer to the IRS was widely reported, since then we have had no idea how much data has been flowing from the ATO to the IRS. To get a better idea of the scope of the data exchange, Carl sent an FOI request to the ATO for a summary of the data sent to the IRS under FATCA for all three reporting years that have now been completed (2014, 2015, and 2016). The ATO complied with this request in a timely manner, sending us a pdf file of a printout of an excel worksheet that spans several pages both vertically and horizontally. [1]

FATCA requires Australian financial institutions (very broadly defined) to report account holder details as well as account balance, dividends, interest and other income paid, and gross proceeds from sale or redemption to the ATO for transmittal to the IRS. It is evident from the graphs below that the amount of data going to the IRS has exploded since the initial data transfer of 2014 data (transferred 30 Sept 2015).

Continue reading “What did we learn from our ATO FOI request?”

From Little Things, Big Things Grow – Annual Report

“…but this is the story of something much more
How power and privilege can not move a people
Who know where they stand and stand in the law

From little things big things grow
From little things big things grow”

From Little Things, Big Things Grow,  Paul Kelly and Kev Carmody, 1991

Let’s Fix the Tax Treaty! seeks to be an open, transparent and effective advocacy group.  As part of this commitment, not only do we, the Steering Committee, believe it is good practice to set annual objectives as part of our action planning, it is also useful to look back and reflect on what was achieved with the resources available to us.

2017 was our first full year of existence and much of the year was spent building the foundations upon which we intend to build activity, momentum and scale over the coming years.   Key milestones along the way included publishing our Strategy Roadmap, creating and implementing a Wiki framework for knowledge capture and ongoing membership development and support.

Many of you will recall that we prepared a 2017 Scorecard which we issued as part of the Strategy Roadmap document.  How did we do?  See the table below this post.  Although not everything was achieved, we believe we made solid steps towards our goals.  Currently, we are finalising our 2018 objectives which will inform our efforts over the coming year.

As always, we value your feedback and comments.  Most of all, we value your involvement.  Are we moving too slow?  Do you want us to go in new or different directions?  Get involved!

Karen, Carl & Caroline

Continue reading “From Little Things, Big Things Grow – Annual Report”

Have you written your MP yet?

Following Karen’s recent Call to Action! post, we are starting to receive  positive feedback on our Open Letter – Extra-territorial Reach of US Tax Reform Legislation from our elected representatives here in Australia.  This campaign is well aligned with the core purpose of our group being  advocating for the Australian Government to renegotiate the under-pinning legacy tax treaties and intergovernmental agreements to provide a fair go for all Australians.

The Open Letter seeks to draw the Australian Government’s attention to an emerging harmful consequence of US extra-territorial taxation as part of US tax reform but it also serves as an opportunity for you to open a dialogue with your elected representatives about the pressing need for Australia to address the many deficiencies in the current Tax Treaty that disadvantage Australians with US ties.

We’ll share some of the positive feedback we received, but first, we want to again remind all of our members to please write your MP / Senators about this issue.   Presently, our follow-up survey suggests that only seven MPs have been contacted to-date, suggesting that only a small fraction of our membership have taken action.  Most Senators from NSW, QLD, SA and VIC have received at least one letter, making a total of 44 Senators who have been contacted. We have yet to hear from anyone in ACT, NT, TAS or WA who has contacted their representatives.  Without your active involvement, affecting positive change will be difficult.

Continue reading “Have you written your MP yet?”

Call to Action!

We are all disappointed that the Tax Cuts and Jobs Act (HR 1) currently before Congress does not contain relief for non-resident citizens. But it could even make things worse!  The current legislative versions of the bill (both House and Senate) are poorly drafted and could be interpreted to harm individual shareholders of  “controlled foreign corporations,” including small businesses owned by non-US resident Americans (even though this is clearly not the intent of Congress).

It is time to contact our Australian elected representatives to make them aware of the potential extraterritorial reach of this harmful provision. The Steering Committee of Fix the Tax Treaty! has sent an open letter to Prime Minister Malcolm Turnbull, Treasurer Scott Morrison, and Foreign Minister Julie Bishop outlining why Australia should be interested in this issue and what Australia can do to mitigate the potential harm.

download letter
Continue reading “Call to Action!”

Behind the Curtain – FOI Requests

 

 

 

 

 

One of the terrific things about living in a parliamentary democracy like Australia is that there are safeguards in place to facilitate transparency of the Australian Government and public services.  One powerful tool is the Freedom of Information Act, or FOI, which provides individuals or organisations with the right of access to documents held by many government agencies.  By law, most public authorities have to respond to an FOI request within 30 days. Their response will either contain the information requested, or give a valid legal reason why it must be kept confidential.  Note that the government agencies may levy charges for locating and making the information available, based on prescribed rates.

Here at Fix the Tax Treaty!, we’ve often wondered whether the Australian Government adequately considered the impacts on Individuals (vs businesses) when negotiating and entering into the Australia – US tax treaty agreements and the FATCA Intergovernmental Agreement (IGA).

We decided to find out!

Continue reading “Behind the Curtain – FOI Requests”

UN Human Rights Complaint

Our friends over at the Isaac Brock Society submitted a human rights complaint to the United Nations in 2014. They send an annual update to the UN, and this time they are offering a chance for more affected individuals to add their signatures to the complaint. If you are interested, you’ll need to email the address given in the blog post to get a password to the pdf of the complaint (which can be downloaded from the link here).

Behind the Scenes

It’s been almost three months since Carl posted our revised Strategy Roadmap. In that time, the Steering Committee (Karen Alpert, Carl Greenstreet, and Caroline Day) have been working behind the scenes on creating a package of materials to support organised action. I’ve written a “Talking Points” paper and am working on a more detailed Issues paper. We also plan to boil this down into one or more single-page briefs that can be used to help inform members of Parliament, policy-makers and other key decision-makers and influencers. We have a series of questions that we would like to ask the appropriate government agencies under Freedom of Information and Carl is preparing FOI requests.  The bottom line is that we need to have both well-documented evidence and a clear objective before we start any campaign to inform policy-makers.

As we have said before, many hands make light work. There are several areas where we could use some help. Please read through this list and consider what you might be able to help with:

  • Steering Committee (see section 2 of the Strategy Roadmap) – we are still looking for two more members to fill the vacant positions (see page 9 of the document)
  • Developing and organising our evidence base – We are creating a wiki to organise and index information from this website and others. Even if you don’t feel up to adding original content to the wiki, consider becoming a wiki editor to help populate the wiki with links to other resources.
  • Branding – Do you have graphic design skills? If you would like to design a logo for us, let us know via our contact form.

 

Investment Constraints 5: Final Thoughts

In this series we’ve discussed how Australian investments impact a US tax return. To finish up, this post will discuss the pros and cons of investing directly in the US as well as a quick discussion of the types of records you should be keeping to assist with US tax preparation.

This is the final installment in our series of posts discussing the ways US tax laws constrain the investment choices of US taxpayers living in Australia. This post covers investing in the US and what records should be kept. These are the areas we have covered in all five posts in this series:

  1. Superannuation
  2. Homeownership
  3. Real Estate
  4. Australian Managed Funds
  5. Australian Shares
  6. Business Ownership Structures
  7. Investing in the US
  8. Record keeping

This series (and everything on this website) is general information only. I am not a lawyer, tax professional, or financial planner, just someone who has learned about US tax and wants to pass on general knowledge. Many areas of tax law are interdependent, so changes in one area may have unintended consequences in another. You should consult a professional who can consider your own personal circumstances before taking any action. Continue reading “Investment Constraints 5: Final Thoughts”

Investment Constraints 4: Structures

An entrepreneur starting a new business has a choice to make – how should she structure the business legally. In Australia, there are actually four alternatives to choose from: sole proprietorship, partnership, company or trust. The reasons for choosing a company or trust often include limiting legal liability, protecting personal assets, or ease of sharing or transferring ownership. And, in the wake of recent caps on superannuation contributions, more financial planners are recommending family trusts to hold savings that cannot be put into the superannuation system. What are these structures? How do they work in a purely Australian context? And what problems or challenges might arise when a US taxpayer tries to do exactly what her Australian neighbour would find optimal?

This is the fourth instalment in our series of posts discussing the ways US tax laws constrain the investment choices of US taxpayers living in Australia. These are the areas we will be covering:

  1. Superannuation
  2. Homeownership
  3. Real Estate
  4. Australian Managed Funds
  5. Australian Shares
  6. Business Ownership Structures
  7. Investing in the US
  8. Record keeping

This series (and everything on this website) is general information only. I am not a lawyer, tax professional, or financial planner, just someone who has learned about US tax and wants to pass on general knowledge. Many areas of tax law are interdependent, so changes in one area may have unintended consequences in another. You should consult a professional who can consider your own personal circumstances before taking any action. Continue reading “Investment Constraints 4: Structures”