# Superannuation from Australia



## WarWolf (May 23, 2016)

Are they are any Australians living in the USA that have gone through the transfer of their Australian superannuation in a lump sum to the USA (upon retirement age in Australia). If so, can you share what the USA tax implications of this lump sum payment were?


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## Bevdeforges (Nov 16, 2007)

You may want to ask this over in the Expat Tax section. Expat Tax - Expat Forum For People Moving Overseas And Living Abroad

Not sure about the US-Australian tax treaty, but I know the subject of lump sum payments from retirement plans is covered in some of the other US tax treaties.
Cheers,
Bev


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## BBCWatcher (Dec 28, 2012)

One of the forum participants here wrote this analysis of Australian superannuation funds from a U.S. tax point of view.

The bottom line is that the U.S.-Australia tax treaty doesn't seem to provide any help. Consequently, from the U.S. point of view, Australian superannuation funds are treated exactly the same as any other comparably constructed foreign financial account. Australian tax advantages count for nothing here. Superannuation funds can vary in construction and holdings, and that article above discusses the permutations. But "fully U.S. taxable" is a fair generalization. They are not qualified U.S. plans, so you can't do something like roll over/convert superannuation funds into a U.S. Individual Retirement Account.

Anyway, you'll need to do some more research (including on how you should be treating those funds in your U.S. tax return/financial reports now, even before distributions), but let's just say I'm not enthusiastic about the idea of tapping into those funds if you can avoid it and if your tax situation is likely to change in the future.


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## WarWolf (May 23, 2016)

Thank you for the answer. I was hoping someone had already got their lump sum payment and could provide information but you were most helpful. I have spoken to an international tax attorney, and he said that he could write a tax ruling on these funds making them exempt from US tax, by designating them as a private social security account - but I am yet to see that, as I won't be entering those waters until I attempt to claim the money. It isn't much, about 50k, and the entire sum is preserved. I have been in the US since 1998, and no employer contributions or private contributions have been made into the fund for 2 years prior to that. It has pretty much lost and earned interest, in fact it is a lower balance now than when I first moved to the US.

The only way my tax situation would change, would be if I got a pay increase in my current job.

My fund in Australia has already said I can claim the funds even if I am working overseas, I just have to be retired in Australia with no intention of returning to work there - which is my case.

It is all a little scary, not having any real strict guidelines on these funds, so I hope the tax attorney I spoke to can help me out. I have never declared the funds on any US tax return, because to me I haven't had the money. I cannot do anything with the money, and the two smaller accounts I had have already been eaten up by fund fees until there is nothing left for me to claim. Who knows what could happen, the market crash and you lost a large percentage, then the rest is gone with fund fees. 

Well, again, thank you for answering me, I guess I will have to throw back to the attorney in August when I become eligible to claim the funds, and jump the US tax hurdles when the time arises.


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## Bevdeforges (Nov 16, 2007)

> I have spoken to an international tax attorney, and he said that he could write a tax ruling on these funds making them exempt from US tax, by designating them as a private social security account - but I am yet to see that, as I won't be entering those waters until I attempt to claim the money.


I think you must have misunderstood something the international tax attorney said. In order to get a "revenue ruling" from the IRS you have to pay a rather substantial fee - and when you get the ruling, it applies only in your case and cannot be cited as "precedent" by anyone else. 
Cheers,
Bev


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## WarWolf (May 23, 2016)

They did say there would be a $500 cost for them to do it, but I thought that sounded quite reasonable.

Or perhaps that is just the beginning, and more costs to come - I just don't know.


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## Bevdeforges (Nov 16, 2007)

WarWolf said:


> They did say there would be a $500 cost for them to do it, but I thought that sounded quite reasonable.
> 
> Or perhaps that is just the beginning, and more costs to come - I just don't know.


If the attorney was talking about an IRS private revenue ruling, that's just the initial cost. And it's not the attorney that writes the ruling - that's the job of the IRS.

https://www.irs.gov/irb/2016-01_IRB/ar07.html
The fee schedule is in Appendix A.
Cheers,
Bev


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## WarWolf (May 23, 2016)

They actually called it a "Tax Opinion"


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## BBCWatcher (Dec 28, 2012)

If the superannuation account has fallen in value (in U.S. dollar terms) then it gets less likely U.S. tax would be/is owed. It seems an odd thing to do to spend $500 to ask the IRS about an issue that may not have any controversy.

So, step one is to figure out the tax due on that distribution. Assume the account is "just another account" per the discussion in the article I linked to upthread -- a safe assumption, I think -- and see what happens.

Caution: Actually converting those Australian dollars to U.S. dollars is not something you are required to do when taking a distribution. For example, you can take a distribution into a simple, ordinary Australian bank account earning ordinary bank interest. Tax issues aside, the Australian dollar is quite low right now relative to the U.S. dollar (and just eyeballing the 10 year chart). If you decide to take the distribution but leave the funds in Australian dollars in Australia then you still have the usual U.S. reporting and tax requirements: FinCEN Form 114, IRS Form 8938 (if you meet the threshold), interest income reported on Schedule B, and a Foreign Tax Credit allowed (IRS Form 1116) for any Australian income tax you pay on that interest income.


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