There are significant issues which will need your attention should you wish to remain compliant with the US Department of Treasury.
You may already be aware of the need to provide an annual US income tax return, regardless of your domicile or residence. Be warned, the United States Treasury is actively documenting and pursuing US citizens and American expats in Australia, and US alien-residents residing abroad, for any outstanding tax liabilities. Agreements with foreign governments are being struck and the choice to ignore US requirements, even for citizens and long term expats, is no longer an option.
If you have not filed your US tax returns or complied with your reporting requirements, we can assist.
The solutions to these issues depend on your individual circumstances, which is why-product based financial advice provided by many large institutions may prove costly.
Back9 offers personal, high-quality, hands-on advice that is specifically designed to suit your unique needs, not the general needs of the masses.
Other legislative issues:
- US citizens are required to file annual bank account details for all bank accounts held outside the US where the total funds combined together exceeds $10,000. This includes superannuation balances.
- US Federal Estate, Gift and GST tax rates and thresholds have changed due to the enactment of the Tax Cuts and Jobs Act of 2017.
On your death, you may lose a significant portion of your assets to US Federal Estate Tax unless those assets are adequately protected.
As of 1 January 2019, the US federal estate, gift and generation-skipping transfer (GST) tax exemption threshold will increase to $11,400,000 for individuals and $22,800,000 for married couples (adjusted for inflation), from $5,490,000 and $10,980,000, respectively, in 2017.
These exemption thresholds are scheduled to increase with inflation each year until 30 December 2025.
On 1 January 2026, the exemption thresholds are scheduled to revert to the 2017 levels, (adjusted for inflation). The highest marginal US federal estate and gift tax rates remain at 40% and the GST tax rate will remain a flat 40%.
US Citizens and SMSFs – the complexities of income tax and superannuation reporting
- US citizens are required to file annual tax returns regardless of domicile. The IRS is increasingly aggressive in enforcing its requirements.
- Superannuation income is treated differently in the US than it is in Australia. It is non-reportable in Australia while arguably it is reportable in the US.
- The US and Australian governments are cooperatively making inroads into the mutual sharing of a citizen's private data such as bank accounts, and Australian banks, as a consequence of FATCA, are now required to divulge the identification and account details of US citizens to the IRS.
- Opening a new bank account in Australia requires disclosure as to whether or not you are a US citizen.
- The US government is likely to already have your details on a database, particularly if you are eligible for or have a social security number.
Estate Planning for US Citizens
Probate proceedings in the US for surviving partners and/or family who live outside of the US is costly, time-consuming and difficult, but may be avoided with competent prior planning.
Virtually no estate tax exemption for a non-US citizen or non-US resident surviving spouse.
With careful planning, a US citizen may transfer at death an unlimited amount to his/her spouse free of estate tax liability. However, this exemption is only allowed where the surviving spouse is also a US citizen. If the surviving spouse is not a US citizen or resident, only $US60,000 may be transferred to the surviving spouse tax free. Amounts above US$60,000 may be taxed at 40%.
Save the heartache, costs, and loss that improper planning now may result in. Back9 can help American citizens and expats in Australia answer these important questions:
- What are the estate tax consequences for US citizens who transfer assets to non-US citizen spouses and how can such outcomes be avoided?
- What are the gift tax consequences for US citizens and American expats in Australia who transfer assets to US or non-US citizens during their lifetime?
- How can establishing a lifetime trust help avoid estate taxes?
- Is an Australian will valid to transfer assets in the US?
- Will assets located in Australia be subject to US estate tax in estates of US residents?
- Will assets located in the US be subject to US estate tax if a US-based Australian citizen returns to live in Australia?
Who do we help?
We provide personalised strategies to high-net-worth individuals and family groups, sophisticated individual investors, business owners, senior executives, and professionals to maintain, grow and protect their wealth.
Contact Back9 Capital Management Pty Ltd for reliable and comprehensive Financial Planning & Asset Management advice.
+61 (2) 9238 8280
+61 (0) 418 854 838
Level 24, 9 Castlereagh Street,
Sydney NSW 2000 Australia
PO Box R1800,
ROYAL EXCHANGE NSW 1225