This post is inspired by a paragraph near the end of this blog post by Marsha-laine Dungog:
We would encourage U.S. expats to seize the current momentum and push for legislation that will “enshrine” the Super’s objectives as one that will “provide income in retirement to substitute or supplement the Age Pension.”This would conclusively lay all doubts to rest that the Super should be analyzed in a manner that is consistent with (and therefore taxed similarly to) U.S. Social Security. The treatment of SG Contributions as foreign social security is consistent with the statutory mandate under Australian Superannuation law requiring employer contributions to be made pursuant to the taxing authority of the Commonwealth of Australia (Commonwealth) and not on account of a contractual relationship between employer and employee. Consequently, earnings accrued on SG contributions and distributions therefrom should also be classified as foreign social security benefits which are already excluded from U.S. taxation under Article 18(2) of the Tax Treaty.
On Wednesday (31 August) the Israeli High Court temporarily blocked preparations for Israel to share data with the IRS under Israel’s FATCAIGA. (Article in Haaretz)(pdf) This is a temporary injunction, with a court date of 15 September for arguments to be heard against the Israeli FATCA IGA. The plaintiffs in the case argued that FATCA violated their rights to privacy and equal treatment and that there was no compelling public purpose to the law. Similar lawsuits against FATCA have been filed in Canada and the US.
For US expats who moved to Australia decades ago, the idea that they should be filing annual US tax returns may be unreal. Many have been non-compliant for years. Because of this, FATCA and the resulting compliance push have (probably on purpose to some extent) entrapped long-term expats, who have found that the rules have changed while they weren’t looking.
Back in 2014, we met with our federal MP who sent a letter on our behalf to the Assistant Treasurer asking about taxation of our superannuation accounts by the US. This is an extract of the response we received from then Acting Assistant Treasurer, Matthias Cormann:
Too often, when members of our government refer to the problems caused by FATCA or US CBT, they speak of “Americans residing in Australia”. This fails to recognise that many of us are Australian citizens, with all the rights that citizenship confers. This also fails to recognise that all Australians have a stake in this issue as FATCA and CBT drain money from the Australian economy, both in the form of US tax paid and as excess compliance costs forced on Australian financial institutions (and paid for by all account holders through higher fees).
As I’ve said elsewhere, there are two fronts to the battle against US extra-territorial taxation: 1) the US and 2) the countries that allow the US to steal from their tax base.
If we are to pursue this struggle on the Australian front, we do it as Australians (which is not to diminish any connection we may still have to our American heritage).
So, how do we frame our letters and communication with our MPs and others to avoid having them frame the issue as one of “Americans in Australia”?
This site is a volunteer effort. We are not lawyers or tax professionals. Everything published on the site is based on our layperson’s understanding of the complex interaction between two sets of tax laws – an interaction that frequently leads to unjust results.
So, why are we here? Since the passage of FATCA in 2010, more and more US citizens living in Australia (and elsewhere outside the US) have been learning about their (previously unknown for many) obligation to pay US taxes on their worldwide income. Taxation of non-resident US citizens is not a new law; it dates from the US Civil War. But FATCA ushered in a new era of enforcement, with every bank on the planet being enlisted to identify US taxpayers and report them (directly or indirectly) to the IRS.
As the level of compliance by US expats rises, the inequity and injustice of the interaction between US tax rules and Australian tax rules has become more apparent.