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Unless your superannuation is considered a foreign grantor trust, most superannuation will be treated as an employee benefits trust. As an employee benefits trust, the income is reported directly on Form 1040 and ownership needs to be reported on Form 8938 if you meet the threshold requirements. (See this article to learn more about the thresholds for filing FATCA Form 8938.) For some taxpayers, only the contributions are taxable from a US perspective, for others the growth (including contributions) in the fund is taxable.
Whether you are taxed on the contributions or growth depends on whether you are considered a highly-compensated employee. A highly-compensated employee is anyone who earned more than $120,000 and/or owned more than 5% of the interest in the business.
- If you are not a highly-compensated employee, your calendar year superannuation contributions are taxable as compensation on your expatriate tax return.
- If you are a highly-compensated employee, your calendar year superannuation growth, realized or not, including contributions, are taxable as compensation on your expatriate tax return.
Superannuation is not qualifying income for the Foreign Earned Income Exclusion so you will not be eligible to use the exclusion for superannuation income. You can instead use Foreign Tax Credits to offset the US taxes on this income.
Passive Foreign Investment Company (PFIC) investments held within an employee benefits trust do not need to be reported separately on Form 8621 on an annual basis.
The contributions or growth taxed on the US expatriate tax return becomes your US basis in the fund. At distribution, this basis is not taxable on the US return.
If considered a grantor trust, superannuation ownership and income needs to be reported on Form 3520 and 3520A, respectively for all years of ownership. On Form 3520A, realized and unrealized income (growth) plus contributions are reported and then taxed on the US return.
Also, PFIC investments held within a foreign grantor trust must be reported separately on Form 8621 on an annual basis.
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