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:
I have a problem with this response.
While I agree that Australia cannot change US law, the taxation of Australian residents by a foreign government is governed by the tax treaty between the Australia and that government (in this case, the US). This treaty is a bilateral (not unilateral) agreement – and Australia should have just as much say in the content of the treaty as the US.
Australia has agreed to a tax treaty that does not protect Australian citizens and residents from US taxation on superannuation. This is a matter that we should take up with the Australian government.
In the second paragraph he states that Treasury is aware of the issue and will raise it when revision of the treaty is next considered. While I understand that it takes both countries to negotiate a new treaty, I would expect that the Australian government would identify this issue as a priority and that they should be pressing the US to come to the table as soon as practical. The letter shows absolutely no recognition of any urgency to address this problem.
Superannuation has been part of the Australian financial landscape since 1992. The tax treaty was last amended in 2001. Why wasn’t superannuation addressed then? Perhaps because the US wasn’t, at that time, recognising “foreign” tax-deferred retirement plans in its tax treaties? Starting with the 2006 US Model Tax Treaty, the US began recognising the tax-deferred status of “foreign” retirement plans. You would think, given the prominence of super in Australia, that the Australian government would have started asking for a treaty amendment as soon as they became “aware” of the 2006 Model Treaty. Now, in 2016, they are 10 years late to the party.
So, it’s not ‘… a matter for them to pursue with the US’! The issues of US taxation of superannuation and the US practice of CBT are not issues for us individually to raise with the US, they are issues for the Australian Government to raise with the US in the context of urgent renegotiation of the tax treaty between the two countries.