Storify is being de-commissioned. The story originally posted here is on the Internet Archive . You can also find it at Wakelet.
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Investment Constraints 3: Equity
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:
- Superannuation
- Homeownership
- Real Estate
- Australian Managed Funds
- Australian Shares
- Business Ownership Structures
- Investing in the US
- 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 3: Equity”
Investment Constraints 2: Real Property
Last week we started a 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:
- Superannuation
- Homeownership
- Real Estate
- Australian Managed Funds
- Australian Shares
- Business Ownership Structures
- Investing in the US
- 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 2: Real Property”
How do US Tax Rules Constrain the Investment Choices of US Taxpayers Living in Australia?
In the Facebook group last week, someone claimed that only the very wealthy are disadvantaged by the dual tax obligations imposed on US citizens and green card holders living in Australia. Certainly, for an Australian resident with only salary income, it is likely that foreign tax credits (FTC) or the Foreign Earned Income Exclusion (FEIE) will completely eliminate any US tax liability. However, for anyone who is considering investing for the future or running their own business, there are many pitfalls and traps in US tax law that need to be carefully considered. It seems like almost anything “foreign” is treated punitively by US tax law, and these xenophobic rules make it difficult for middle class US taxpayers to save effectively while living outside the US.
Over the next few weeks, I will be covering the following areas where US taxpayers living in Australia need to be particularly careful:
- Superannuation
- Homeownership
- Real Estate
- Australian Managed Funds
- Australian Shares
- Business Ownership Structures
- Investing in the US
- 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 “How do US Tax Rules Constrain the Investment Choices of US Taxpayers Living in Australia?”
CRS – Coming soon to a bank near you…
From 1 July 2017, Australian financial institutions will be required to report account information of anyone with a tax residence outside of Australia to the ATO under the OECD’s Common Reporting Standard (CRS). Once the United States rolled out FATCA, countries in the OECD decided that cross-border reporting of financial accounts might be a good way to rein in use of tax havens for tax evasion. However, while the two are similar, there are some differences. The key features of CRS are a common standard for: the scope of reporting (type of information, which account holders and which institutions), the due diligence required, format of the data to be exchanged.
With the current push for FATCA repeal, and the recent Hearing on The Unintended Consequences of FATCA, CRS is mentioned by some as a possible substitute for FATCA. Unfortunately, there seem to be a few misconceptions about the differences between the two Automated Exchange of Information (AEOI) schemes. As implemented in Australia, CRS is perfectly compatible with Citizenship Based Taxation.
While it is exceedingly unlikely that the U.S. Congress will ever sign on to CRS, it is important for those who advocate CRS as a more “benign” alternative to be clear on exactly what CRS entails.
This article covers:
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”