The Australian Superannuation fund is part of Australia’s national pension scheme and constitutes one of the pillars of Australian social security. The Super is a hybrid structure created under Australian law to encourage Australian workers to accumulate savings for retirement at preferential rates. The Super has no equivalent under US law. Its structure is so unique that the US Internal Revenue Service has yet to issue definitive guidance on how it should be treated for US tax purposes. This has resulted in confusion and sometimes misreporting, which may result in burdensome tax and reporting consequences.
Moodys has engaged in an open dialogue with the IRS and tax-writing committees of the US Congress to assist them in formulating a fair and workable classification of the Super for US tax purposes – one that avoids the possibility of double taxation. We strive to bring certainty of your US tax liabilities and reporting obligations to enable you to take appropriate steps to become compliant without the fear of incurring civil and criminal penalties.
US TAXATION OF THE SUPER
Generally, the Super pays Australian taxes on contributions and income at the rate of 15 percent. Under US tax law, US persons who are beneficiaries of a Super are also subject to US tax on this income, even if he or she does not have access to the funds. Unfortunately, the Australia-US tax treaty offers little relief for US persons who reside in Australia. The treaty does not address the US taxation of the income of a Super even though it should be treated similarly to a foreign national pension scheme. Consequently, a US person residing in Australia who is the beneficiary of a Super is in an uneasy confluence of both Australian and US tax laws.
Due to the lack of IRS guidance on how a Super is classified and taxed under US tax law, there has been confusion on how to properly report Supers. This is not the case with US persons living and working in Canada, Hong Kong, India, Ireland, Israel, Netherlands, New Zealand, Singapore, the United Kingdom, and other countries that have updated tax treaties that exempt similar pension schemes from US taxation. A Super should be reported for US tax purposes in a manner that is consistent with its true nature without having to bear the punitive and costly tax consequences of doing so.
Our team of experienced US lawyers and Certified Public Accountants can provide clarity on this complex topic. We’ll walk you through every step of the reporting process to ensure you become fully compliant with your US tax obligations and reporting requirements without having to sacrifice your financial future to do so.
Contact us to learn more.
- Reporting Australian Superannuation Funds as Foreign Trusts for Tax Purposes (October 5, 2018)
- The “Super” reason Australians are renouncing their US citizenship (July 21, 2017)
- Australian Superannuation reforms may negatively impact US citizens (May 12, 2017)
- Renouncing Your US citizenship: Failed Amendment May Signal that Now is the Time to Get Out (March 13, 2017)
- Renouncing Your US citizenship: Is divorcing Uncle Sam Right for You? (March 10, 2017)
- US taxation of Australian Superannuation funds: when the Super is NOT so super after all (July 27, 2016)
Alexander Marino is quoted in an article by The Canberra Times entitled “Tax fears: US-Aussie dual citizens provide IRS with details of $184 billion, March 03, 2018, The Canberra Times and The Sydney Morning Herald
- Moodys is quoted in an article entitled, “SMSFs warned on new IRS compliance campaign,” November 12, 2017, SMSF Adviser
- Moodys is mentioned in an article entitled, “US citizens renouncing because of tax laws affecting Australian superannuation,” September 11, 2016, Sydney Morning Herald