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aussiebobaustin

Question

How to report a distribution from an Australian Superannuation fund for a duel US/ Australian citizen ?

Forum|Forum|1 year ago
October 29, 2024
2 replies
0 views

I have no idea if this needs to be reported .

I was an IBM employee in Australia from approximately 1985 thru 1998.

I retired several years ago.

I don't believe I made any contributions to the superannuation fund.

The fund has been through various companies including AMP and OnePath and I don't have a precise audit trail yet regarding the history of contributions vs growth.

From what I have seen, the US tax law may not be clear on how to handle this, but I believe there are many others

who are in the same situation ... If I seek tax law help , it will protect me but I prefer to do my own taxes as I have previously done with TurboTax.

Not A Product Question

Opus 17

Employee

Generally, if you are a US person living abroad, all your income is taxable in the US unless there is a tax treaty between the two countries that indicates an exception. But this needs an expert @pk12_2

aussiebobaustinAuthor

Thanks Opus 17,

This is what I don't get ... if "Superannuation" fits like a "square peg in a round hole" for US tax law , then it needs to be fixed. I don't believe I should have to retain some fancy international tax firm to be able to get an answer.

When I worked as a VITA tax volunteer, we had IRS provided flow charts to determine how to handle regular tax situations.

I can't see why such a flow chart couldn't exist for Australian Superannuation .... unless US tax law doesn't know how to handle "superannuation" . That means hiring an international tax lawyer is more hiring someone who is confident they can defend their interpretation of US tax law with the IRS and protect the tax payer from any issues.

I believe all I need to provide is :

A. Who funded the account.

B. What gains the account had .

C. Possibly how the funds were invested.

Thanks, Bob.

Opus 17

Employee

@aussiebobaustin

I don't know what you are quoting. The US is under no obligation to make their tax laws conform to other countries. Under US tax law, all income is assumed to be taxable unless you can prove otherwise. In the case of overseas income, there is sometimes a tax treaty between two countries that modifies this general rule. (For example, I believe that for expats living in Germany, the US agrees not to tax German social security income and Germany agrees not to tax US social security income. But I may be remembering that incorrectly.)

And I don't think VITA is going to have much to say about overseas rules that affect a tiny percentage of US taxpayers.

If Wikipedia is to be believed, the employer mandatory contribution to a super is not considered taxable income at the time. That would make it the equivalent of an IRA or 401k--money is not taxed when it is contributed, so everything is taxed when it is withdrawn. I can't tell from the article whether additional employee voluntary contributions are made before or after taxes. If before tax, then the super really is like an IRA or pre-tax 401k. If employee voluntary contributions are after-tax, then that would give you a partial basis in the payout, and you would only pay tax on the gains, but under US law, the burden is on you to prove the amount.

However, there is another expert on this forum who knows the most about international tax issues, and I hope he or she stops by and adds their comments.

pk12_2

Employee

@aussiebobaustin , while I generally agree with the comments by my colleague @Opus 17 on this thread, before I jump in I want to be sure that I am reading/ understanding the situation correctly. Thus below I list my assumptions:

(a) You a US person ( citizen/GreenCard ) worked in Australia for many years.

(b) For all those years, you filed both US and Australia returns recognizing your world income.

(c) During your stay / work in Australia, you did not contribute to the local pension fund i.e. the basis of the fund at distribution is zero ( for US tax purposes ).

(d) During your work life ( both domestic and Foreign/Australia you did participate in US or Australian equivalent of Social Security and Medicare ( FICA/ SECA ).

(e) Currently your tax home is US

Please confirm and/or correct my assumptions to avoid me being in the left field.

Also are you talking about tax year 2023 or 2024 ?

I will circle back once I hear from you --yes ?

aussiebobaustinAuthor

Thanks for helping pk .

Answers to your questions below.

(a) You a US person ( citizen/GreenCard ) worked in Australia for many years.

Yes, US citizen. Started off in Australia as Australian citizen where I joined IBM Australia around 1985 thru 1998

Then transferred to IBM US and got married and green card then US citizen.

(b) For all those years, you filed both US and Australia returns recognizing your world income.

For years working for IBM Australia filed Australian and US tax returns for times I was working in the US and

Australia . All this was while I was working for IBM Australia and IBM Australia handled the required tax returns.

After joining IBM US, I only had to file US taxes .

(c) During your stay / work in Australia, you did not contribute to the local pension fund i.e. the basis of the fund at distribution is zero ( for US tax purposes ).

I grew up in Australia and worked for IBM Australia from approx. 1985 thru 1998 , during this employment by IBM

Australia , I didn't contribute anything to the superannuation fund that was funded by IBM .... I believe it was a

grovernment requirement or atleast became a requirement for companies to contribute to superannuation funds.

(d) During your work life ( both domestic and Foreign/Australia you did participate in US or Australian equivalent of Social Security and Medicare ( FICA/ SECA ).

Yes, I contributed to Social Security the whole time I was employed by IBM US . ( approx. 20 years ).

I have retired and get a monthly Social Security check and am signed up with Medicare.

(e) Currently your tax home is US

Yes , I file only US taxes every year using TurboTax.

Since the Superannuation account in Australia kept changing names / trustees, I decided to make a withdrawal this year partly to test if it was real ... so the issue I have is if I need to report that superannuation withdrawal and if so how to report it for my 2024 US tax return.

pk12_2

Employee

@aussiebobaustin my general opinion on this situation is best described as agreeing with this following article --->U.S. Tax Treatment of Australian Superannuation

There are other positions on this such as treating the superannuation as social security or a private mandated trust etc. -- I do not fully agree with such

Note however that tax treatment does not immunize you from FBAR and FATCA regs. -- so those may still be applicable.

Is there more I can do for you ?