I was sad to hear of the death of Jack Bogle last week. Jack was the “father” of modern index funds. He founded Vanguard Investments in the 1970s. His no-load, low-fee index fund was a major innovation in a world where investing had been only available to those who were willing to pick their own stocks or pay professional fund managers large fees to get results that weren’t statistically any better than a broad market index.
An index fund invests in all of the shares in the market (or the index that measures the market) – there are no investment decisions to make, and very little trading is necessary. This innovation has delivered market returns to small investors all over the globe at very low cost .
So, why am I talking about Jack Bogle and index funds on a website devoted to Australia/US cross-border tax issues? Because nonresident US citizens are punished for owning local versions of this basic investment!
What: Since the passage of FATCA in 2010 and Australia’s acquiescence in the form of the FATCA IGA (signed in 2014), an increasing number of US citizens resident in Australia have become aware of their US tax obligations. For many the solution has been to renounce US citizenship. This will be an informal and interactive presentation covering questions such as:
My bank asked for my US SSN? Does that mean I must file US tax returns?
What does filing US tax returns mean for my super? My Australian investments? Will I be double taxed?
Does filing both US and Australian taxes defeat the objectives of financial and retirement planning in Australia?
What is the transition tax? GILTI? Is it still viable for a US expat to own a small business in Australia?
Will the US ever fix these problems by joining the rest of the world in taxing based on residence rather than citizenship? What is this new “TTFI” that I have heard about?
How do I renounce/relinquish US citizenship? Do I have to pay an exit tax on my Australian assets?
How do I determine whether renunciation is right for me?
If I renounce what happens to my Social Security? My IRA or 401(k)?
How does renouncing US citizenship affect my ability to travel to the United States?
Who: This is a joint presentation by Karen Alpert and John Richardson.
Karen Alpert founded the website Let’s Fix the Australia/US Tax Treaty and its associated Facebook group. The purpose of the group is to lobby and educate the Australian government regarding the impact of extraterritorial US laws on Australian citizens and residents and the cost to Australia of surrendering its sovereignty in these matters. Karen has a Ph.D. (UQ, Finance) and lectures in Finance at the University of Queensland.
60% of Australians own equity based investments (listed or non-listed) outside of institutional superannuation accounts, and 37% of Australians own listed shares (2017 ASX Australian Investor Study). There are two main ways to invest in equity – purchase shares directly on the share market or purchase a slice of a portfolio managed by a professional portfolio manager. For Australian investors who are claimed by the US, the US tax implications of these two choices are quite different.
This is the third 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:
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 3: Equity”
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.