Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax
This answer was rated:

I am a a dual Australian/American citizen but I have lived

I am a a dual...

I am a a dual Australian/American citizen but I have lived in Australia for over 20 years so I am a bona fide resident. I worked for an Australian company for 16 years during which time I built up my super. Here is my question: in Australia, if I were to move my super from one non-taxable super fund to another the Australian Tax Office (ATO) does not consider it taxable. I have heard interpretations of the US/AUS treaty that suggest that the fact of this rollover means the US can take a huge chunk of my super which the ATO considers to go directly against the entire intent of super, i.e., to enable Australians to retire on private funds rather than on the pension. What is your view on this?

Show More
Show Less
Ask Your Own Tax Question
Answered in 15 minutes by:
11/20/2013
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,683
Experience: Taxes, Immigration, Labor Relations
Verified

Lev :

Hi and welcome to our site!
From US tax prospective - you are an US citizen - and as such you are taxed on all your worldwide income.
Your taxable income is recognized when received - and you may defer your tax liability when you make contribution into Australian super funds. From the IRS prospective - that is your regular investment account and all income is reported every year it is credited.
While funds in your surer are deferred from tax liability - Australia - these funds are NOT deferred in the US.
You are generally taxed on income that is available to you, regardless of whether it is actually in your possession. As long as the money are credited in your super account and are allocated to you without substantial risk of forfeiture - you are considered as constructively received that income.

Customer:

I'm afraid I don't quite understand your answer. Are you saying that the US can actually take money from an Australian that even the Australian government doesn't take? This seems quite egregious.

Customer:

Also, does the US look at the full value of the super or just the employer contribution, or what, when assessing tax?

Lev :

That is correct - US tax law is not based on Australian laws.
You may only defer tax liability for contributions made into qualified retirement plan. Australian super is NOT a qualified retirement plan under the US law - thus contributions are NOT deferred.

Customer:

So they look at the full value of the super and not just employer contributions?

Lev :

You are generally taxed on income that is available to you, regardless of whether it is actually in your possession. Every year amounts credited to your super must be reported as your income on the US tax return. That amount is added to your basis in that account.

Lev :

As you lived and worked in Australia for over 20 years - every of these years you must report your income on your US tax return. That income includes amounts credited to your account in your super.

Customer:

Wow, this is stunning. I only just this year became aware of the Amnesty program and I have submitted my 1040s and have enrolled in FBAR but I had no idea that I was supposed to include super because, as you can imagine, like any Australian I don't think of it as taxable or available. Are you able to advise on whether or not I can amend my returns to include this information? Are you also saying that they US will back tax me for the amounts credited to my super each year?

Customer:

Honestly, it also worries me that none of my local contacts knew of this so it makes me wonder how well the US government is communicating this information.

Customer:

Are you still with me?

Lev :

Unfortunately - that is correct. Just because some income is not taxable in Australia (or any other foreign country) - that doesn't mean it is not taxable in the US.
As a general rule - whatever your employer and you contributed into a foreign retirement account may not be excluded from your US taxable income. All these amount are taxable in the year received - and will be included into your Cost.
Then - for earnings in that account - the situation is different - it is treated as annuity - and it is not taxed unless distributed.
Please consider that illustration example. For instance your contributions were $1000 every of these 20 years - total $20,000 - that means - every year - you should report $1000 as your taxable income - and your cost is $20,000.
Assuming - there are additional earning in that account $10,000 - so total account value is $30,000.
When you take distribution - out of $30,000 - only $10,000 is taxable, but $20,000 woudl be your cost (or basis) - and will not be taxable because that amount was taxable in previous years.

Customer:

I'll have a good read of that. I am not someone who wants to dodge the IRS so do you think I should amend the returns I recently filed as part of the Amnesty program?

Lev :

According to the tax law - yes - you need to amend your past tax return - and report all your taxable income.

Customer:

Ok, one final question for now. When I amend, do you think I'll be looking at serious penalities or taxes. I am talking about returns that show that I had no income in the U.S. for the years that I filed under Amnesty, which is true.

Lev :

As that related to your conversion from one super account to another supper account - that might qualify for 'Section 1035 Exchange' - a tax-free exchange of an existing annuity contract for a new one.
So far - you woudl not be taxed on that rollover.

Lev :

I might suggest for your reference this publication - https://www1.genworth.com/content/etc/medialib/genworth_v2/pdf/pension_protection.Par.12661.File.dat/
so you woudl be familiar with such option.

Lev :

If you did not report your total income - there is no option - you need to amend your tax returns - and correct your reporting.
Will or will not that result in any additional tax liability - would be hard to say without actual calculations.
Because Australian tax rated are generally higher - and you woudl be able to claim a foreign earned income exclusion - it is possible that you woudl not have any US income tax liability - but again - you still need to prepare US tax return and report all your worldwide income.

Customer:

Will that address the question I just asked about penalties or taxes when I amend to show super? (I'll read it but I'm guessing that if it's like other tax documents I won't understand it.)

Customer:

Oops, I meant to say thanks for that previous answer. I will check that link as per my comment above.

Customer:

You have been great. It's absolutely fantastic to be able to chat to someone like this.

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,683
Experience: Taxes, Immigration, Labor Relations
Verified
Lev and 87 other Tax Specialists are ready to help you
Ask your own question now
Ask Lev Your Own Question
Lev
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,683
30,683 Satisfied Customers
Experience: Taxes, Immigration, Labor Relations

Lev is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,338 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,980 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
I would like to open a business:to prepare tax returns for
Hello! I would like to open a business:to prepare tax returns for non resident,more exactly for students who come on a J1 -Visa ("Summer Work and travel" programme=where they work for aprox 3 months i… read more
Lev
Lev
Tax Advisor
30,683 satisfied customers
What are the forms for reporting Rental Income to the IRS on
What are the forms for reporting Rental Income to the IRS on foreign properties - we collect each month? Is this filed separately from our personal returns?… read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,083 satisfied customers
Reporting pension and social security income on both Forms
Reporting pension and social security income on both Forms 1040 and 1041? … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I am preparing 6 years of tax returns, I have an IRS Notice
I am preparing 6 years of tax returns, I have an IRS Notice 2014-7 that states that states "IHSS wages received by IHSS providers who live in the same home with the recipient of those services are als… read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
FOR GUILLERMO: What line on the 1040 income tax return is
FOR GUILLERMO: What line on the 1040 income tax return is used to determine the sponsor's income for Form I-864? Is it line 22: TOTAL INCOME? Or, line 37, ADJUSTED GROSS INCOME?… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Received a CP2000 from IRS on Retirement distributions I am
Received a CP2000 from IRS on Retirement distributions I am 54 years old and closed my retirement accounts when I became disabled I am on SSDI now and didn't think I had to pay the 10% penalty… read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
W, is there a amend tax return there at IRS there for me? My
Hi, my name is ***** ***** Miller, is there a amend tax return there at IRS there for me? … read more
Fred Rook
Fred Rook
Corporate Controller
BSBA
64 satisfied customers
Is income from an LLC passed through to personal tax return
Is income from an LLC passed through to personal tax return considered earned income, enabling me to contribute to a traditional IRA?… read more
abci168
abci168
Principal
27 satisfied customers
A 71 YEAR OLD TAXPAYER IS RETIRED (NO EARNED INCOME) AND HAS
A 71 YEAR OLD TAXPAYER IS RETIRED (NO EARNED INCOME) AND HAS A 401K WITH HIS PRIOR EMPLOYER FROM WHICH HE HAS BEGUN TO TAKE HIS MRD. HE WOULD LIKE TO TAKE THE 401K BALANCE AND MOVE IT TO A ROTH IRA. H… read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,083 satisfied customers
Suppose my taxable income in 220,000 this year and the tax
Suppose my taxable income in 220,000 this year and the tax rate is X up to 200K, but Y for 200and over, do I pay Y on the full 220K or just that above 200K? … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Can I report rental income in my tax return on a property
Can I report rental income in my tax return on a property thar is owned by my father? He does not live in the US is not a US citizen and can sign a document to allow me to receive the rental… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,980 satisfied customers
Lev, I am preparing federal unfiled tax returns for a client
Good morning Lev, I am preparing federal unfiled tax returns for a client of mine. I am also ready to finalize the 2014 tax return and there is an NOL created on his return. The client has already fil… read more
Lev
Lev
Tax Advisor
30,683 satisfied customers
Under current law a 100,000 taxable income pays $10,365 plus
Under current law a 100,000 taxable income pays $10,365 plus 25% of the amount exceeding $79,400 i.e. about $16,000. Under tax reform will the tax be $25,000? … read more
Lev
Lev
Tax Advisor
30,683 satisfied customers
Is a tax return less likely to be audited if it's prepared
Is a tax return less likely to be audited if it's prepared by a CPA or simply a tax person? Secondly, our Rotary Club is a 401 C for we have a 401 c 3 Foundation the question is can individual members… read more
socrateaser
socrateaser
1,031 satisfied customers
I am receiving some income from a foreign government "social
I am receiving some income from a foreign government "social security-type" benefit program. Where should I report this income in my Tax Return? Should I report it as "Other Foreign Financial Assets"?… read more
abci168
abci168
Principal
27 satisfied customers
I need help with preparing a tax return and I may need to
Hi I need help with preparing a tax return and I may need to file form 3520 as well. Please let me know if you can assist.… read more
taxmanrog
taxmanrog
Master\u0027s Degree
776 satisfied customers
I am preparing a corporate tax return. The company is a
I am preparing a corporate tax return. The company is a payroll company based in NJ but almost all of the clients are in NYC. Is the income generated from NY clients require a NY S corporate tax retur… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Us citizen living and working in colombia SA earned income
us citizen living and working in colombia SA earned income and unearned how do i report the interest and dividends are these tax at he same rate or can you also exclude them like the earned income … read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,083 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x